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JPMorgan Russian Securities plcAnnual Report & Accounts for the year ended 31st October 2016

Russian Securities 4pp cover 19/01/2017 17:43 Page 2

Investment Objective To provide shareholders with capital growth

Investment PoliciesTo maintain a diversified portfolio of investments primarily inquoted Russian securities or other companies which operateprincipally in Russia.

The Company may also invest up to 10% of its gross assets incompanies that operate or are located in former Soviet UnionRepublics.

Investment Limits and RestrictionsThe Board seeks to manage some of the Company’s risks byimposing various investment limits and restrictions.

- No more than 10% of the Company’s gross assets are to beinvested in companies that operate or are located in formerSoviet Union Republics.

- The Company will not normally invest in unlisted securities.

- At the time of purchase, the maximum permitted exposure toeach individual company is 15% of the Company’s grossassets.

- The Company will not normally invest in derivatives.

- The Company will utilise liquidity and borrowings in a range of10% net cash to 15% geared in typical market conditions.

- No more than 15% of gross assets are to be invested in otherUK listed investment companies (including investment trusts).

Further details on investment policies and risk managementare given in the Strategic Report on pages 16 to 20.

Benchmark The MSCI Russian 10/40 Equity Indices Index in sterling terms.Effective from 1st November 2016, the Company’s benchmark isthe RTS Index in sterling terms (RTS).

Capital Structure UK domiciled. Full listing on the London Stock Exchange.

At 31st October 2016, the Company’s share capital comprised52,337,112 ordinary shares of 1p each.

Continuation VoteA resolution that the Company continue as an investment trustwill be put to Shareholders at the Annual General Meeting in2017 and every five years thereafter. See page 24 for furtherdetails.

Management Company and Company SecretaryThe Company employs JPMorgan Funds Limited (‘JPMF’ or the‘Manager’) as its Alternative Investment Fund Manager. JPMFdelegates the management of the Company’s portfolio toJPMorgan Asset Management (UK) Limited (‘JPMAM’).

FCA regulation of ‘non-mainstream pooledinvestments’The Company currently conducts its affairs so that the sharesissued by JPMorgan Russian Investment Trust plc can berecommended by independent financial advisers to ordinaryretail investors in accordance with the Financial ConductAuthority (FCA) rules in relation to non-mainstream investmentproducts and intends to continue to do so for the foreseeablefuture.

The shares are excluded from the FCA’s restrictions which applyto non-mainstream investment products because they areshares in an investment trust.

Association of Investment Companies (AIC)The Company is a member of the AIC. www.theaic.co.uk

WebsiteThe Company’s website, which can be found atwww.jpmrussian.co.uk, includes useful information on theCompany, such as daily prices, factsheets, current and historichalf year and annual reports and how to buy shares in thisCompany.

Features


1

Contents

FINANCIAL RESULTS

STRATEGIC REPORT

3 Chairman’s Statement

7 Investment Manager’s Report

10 Summary of Results

11 Performance

12 Ten Year Financial Record

13 Ten Largest Investments

14 Sector Analysis

15 List of Investments

16 Business Review

GOVERNANCE

21 Board of Directors

23 Directors’ Report

25 Corporate Governance Statement

30 Directors’ Remuneration Report

33 Statement of Directors’ Responsibilities

34 INDEPENDENT AUDITOR’S REPORT

FINANCIAL STATEMENTS

40 Statement of Comprehensive Income

41 Statement of Changes in Equity

42 Statement of Financial Position

43 Notes to the Financial Statements

REGULATORY DISCLOSURES

59 Alternative Investment Fund Managers Directive (‘AIFMD’)Disclosures (Unaudited)

SHAREHOLDER INFORMATION

60 Notice of Annual General Meeting

63 Glossary of Terms and Definitions

64 Where to buy J.P. Morgan Investment Trusts

67 Information about the Company

Russian Securities_pp01_20 19/01/2017 17:40 Page 1

2 JPMORGAN RUSSIAN SECURITIES PLC. ANNUAL REPORT & ACCOUNTS 2016

Financial Results

TOTAL RETURNS (INCLUDES DIVIDENDS REINVESTED)

+50.8%Benchmark3

(2015: –13.4%)

Long Term PerformanceFOR PERIODS ENDED 31ST OCTOBER 2016

3 year 5 year 10 year performance performance performance

Return to shareholders1 –5.8% –0.6% +20.8%Return on net assets2 –1.8% –9.8% +28.8%Benchmark return3 +3.2% +4.2% +55.5%

1 Source: Morningstar. 2 Source: J.P. Morgan. 3 Source: MSCI. The Benchmark is the MSCI Russian 10/40 Equity Indices Index in sterling terms. Effective from 1st November 2016, the Company’s benchmark is the RTS Index in

sterling terms (RTS).4 8.0p of the 14.0p is payable subject to the passing of a resolution at the 2017 AGM. 6.0p of the 14.0p was paid as an interim dividend on 28th October 2016.

A glossary of terms and definitions is provided on page 63

+53.1%Return to shareholders1

(2015: –13.5%)

+56.2%Return on net assets2

(2015: –14.2%)

14.0pProposed ordinary dividend4

(2015: 13.0p ordinary4.0p special)


3

Performance and overviewThe Company’s positive performance continued into the second half of the year reflectingthe general improvements in the Russian market following the rise in the price of oil.

It is pleasing to report that the Company’s return on a net assets basis outperformed thebenchmark by 5.4% returning 56.2%. The return to shareholders also outperformed thebenchmark, with a rise of 53.1%. The Company’s benchmark during the period under reviewwas the MSCI Russia 10/40 Equity Indices Index and gained 50.8%.

Despite these positive movements, the discount at which the Company’s shares traderelative to its net asset value widened to 16.4% at the year end. Factors that led to thewidening of the discount over the year included the perceived increased political riskassociated with investment in Russia and also the general widening of discounts in emergingmarkets as they fell out of favour.

As at 17th January 2017 the discount stood at 11.2%. Since the year end to 17th January 2017the benchmark index rose 15.1% and the Company’s return to shareholders rose 21.5%.

During the Company’s financial year under review Russia’s economy recorded someimproving data with the increase in oil prices helping the Ruble to appreciate. The CentralBank of Russia interest rate reductions helped bring some feeling of stabilisation. Althoughcorporate earnings in Russia have been under pressure in 2016 and the Company’s dividendincome declined, the longer term outlook for dividend income remains positive.

Russia’s external politics with Western powers continued to be tense as its involvement inSyria proved controversial, and relations with Turkey remained fragile. However, althoughfar too early to comment with any certainty, the impact of the Trump presidential victory inthe US may lead to some thawing of relations.

The United States and European Union economic sanctions due to Russia’s involvement inthe conflict in Ukraine remain in force with an extension to March 2017 signed by PresidentObama in spring 2016. JPMorgan Asset Management’s compliance & investment functionsmonitor investments and the Company is assured by J.P. Morgan that processes are in placeto ensure that the Company remains compliant with the current sanctions regime. Inaddition, the political and economic developments and risks in the region are closelymonitored. The Board carried out regular reviews of the Company’s risk profile during theyear and you will see details of what we judge to be the key risks set out on page 18. TheCompany’s Manager maintains a diversified portfolio which adheres to the Company’sinvestment and risk control guidelines.

Objective and Strategy of the CompanyThe Board holds a strategy day each year during which it reviews the external environmentin which the Company operates and other major factors affecting the Company. This year wepaid particular attention to the political and economic environment, the Company’supcoming continuation vote and feedback from major shareholders.

As referred to in the Investment Manager’s Report, at the Company’s AGM, the shareholdersapproved a resolution to widen the Company’s Investment Objectives. Later in the year, afterconsulting with major shareholders, on 28th October 2016 the Company also announcedthat the benchmark would be changed to the RTS Index from 1st November 2016. This was

Strategic Report

CHAIRMAN’S STATEMENT



because the RTS Index is a more appropriate benchmark for the Company as it includesa wider range of stocks, more accurately reflecting the universe in which the Companyinvests. This is particularly relevant as the previous benchmark, MSCI Russia 10/40 EquityIndices Index in sterling terms, consists of a significantly narrower range of companies thanthat offered by the market in Russia and its former states.

Continuation VoteAt the Company’s General Meeting on 27th January 2012, a resolution was passed requiringthe Company to put a continuation vote to shareholders every five years. Therefore,a continuation vote will be put to shareholders as an ordinary resolution at the forthcomingAnnual General Meeting (AGM) to be held on 7th March 2017. Given the positive performancereturns highlighted above, and after considering the risks associated with investments inRussia your Board recommends to shareholders that they vote in favour of the Companycontinuing as an investment trust for a further five year period.

On the 4th January 2017 the Board of the Company announced that, following consultationwith the Company’s large shareholders and its advisers, it plans to introduce, subject to thepassing of a resolution in favour of the Company’s continuation as an investment trust at theCompany’s AGM on 7th March 2017, a measure to oblige the Board to make a tender offer toshareholders for up to 20% of the outstanding share capital at NAV less costs and less adiscount of 2% if, over the next five years (from the start of the current financial year being1st November 2016), the Company’s net asset value total return in sterling on a cum incomebasis is below the total return of the benchmark in sterling terms over the 5-year period.

Any tender offer will also be conditional on shareholders approving the continuation vote in2022. The Board believes this measure is in shareholders’ interests as it further incentivisesthe manager to focus on long-term investment performance.

The Board also considered whether to include a discount related condition when proposinga tender offer but felt that the higher levels of volatility in Russia, both political and marketrelated, meant that this measure was inappropriate. Given the current reliance that theRussian economy has on the oil price, the Board believes it would be hard to influence thediscount if there was a global commodities slump, or significant geopolitical pressuresaffecting Russia and political sentiment. As the Board has stated in the past, the Boardmonitors discount movements closely and, subject to market conditions, the sharerepurchase authority will be used to assist in managing the imbalance between supply anddemand when the discount widens for Company-specific reasons.

DividendsRevenue for the year, after taxation, was £8,096,000 (2015: £10,268,000) and the revenuereturn per share, calculated on the average number of shares in issue, was 15.47 pence(2015: 19.60 pence). Based upon the revenue generated by the portfolio, an interim dividendof 6.0 pence per share in respect of the year ended 31st October 2016 was paid on28th October 2016. Also in respect of the year ended 31st October 2016, the Board proposesa final dividend of 8.0 pence making a total of 14.0 pence per share for the year (2015:13.0 pence per share, excluding special dividends of 4.0 pence per share). The final dividendis proposed to be paid on 10th March 2017 to ordinary shareholders on the register at theclose of business on 10th February 2017, if approved by shareholders the final dividend willamount to £4,187,000 (2015: £6,804,000). The Company’s objective remains that of capitalgrowth, and the payment of dividends to investors is dependent on the level of dividend

Strategic Report continued

CHAIRMAN’S STATEMENT CONTINUED


5

distributions from the companies in the portfolio. The Board reviews income expectationsthroughout the year. Should income receipts permit the Board will continue to makepayment of an interim dividend as well as a final dividend in 2017.

Discount ControlThe Board’s objective remains to use the share repurchase authority to assist in managingany imbalance between supply and demand for the Company’s shares, thereby reducing thevolatility of the discount. During the period the discount ranged from 13.8% to 18.2%. Earlierthis year the Board reviewed the Company’s discount control policy in light of the highmarket volatility. It concluded that buybacks of shares should be considered when theCompany’s discount was above 10% (previously 8%) and the absolute level of the Company’sdiscount should be taken into account, together with the relative level of discount amongstpeers investing in emerging markets. After regular and careful consideration during thecourse of the year the Board decided against the buying back of shares. It concluded thatbuybacks would be ineffective in reducing the discount, given the particular uncertaintiesaround prospects for the Russian market and the generally widening discounts for emergingmarkets.

The Board will seek authority to renew the Company’s share issuance and buyback powers atthe forthcoming AGM.

Board of DirectorsAs referred to in my Chairman’s Statement in the Company’s Half Year Report and Accountsto 30th April 2016, following Lysander Tennant’s retirement as a Director at the Company’sAGM in March 2016, a search for a new director to join the Board was conducted by anindependent non-executive search consultancy. On the 27th July 2016 we were delighted toannounce the appointment of Tamara Sakovska as a new Director of the Company, effectivefrom 1st August 2016. You can see the details of Tamara‘s experience on page 22.In compliance with corporate governance best practice, all Directors will be standing forreappointment at the forthcoming AGM. Following the Company’s annual evaluation of theDirectors, the Chairman, the Board and its Committees, the Board recommends toshareholders that all Directors be reappointed.

The Company’s Directors fees were last increased with effect from 1st November 2013. TheBoard has agreed that, bearing in mind the time since the last increase and the extra burdenplaced by new regulations and developments it was appropriate to increase directors feeseffective from 1st November 2016 as follows: Board Chairman’s fee increased by £2,500(from £35,000 to £37,500), Audit Committee Chairman by £3,000 (from £27,000 to £30,000),Directors by £2,000 per annum (from £23,000 to £25,000).

Investment ManagerThe Board pays particular attention to the way in which the Trust is run and the cost of sodoing. As part of the Board’s scrutiny of the management of the Trust the InvestmentManager is subject to an annual review including performance record managementprocesses, investment style, resources and risk control mechanisms. After a careful reviewthe Board feeds back to the Manager any areas where it feels changes are needed orimprovements could be made.




CHAIRMAN’S STATEMENT CONTINUED

Annual General MeetingThe Company’s AGM will be held on Tuesday, 7th March 2017 at 12.00 noon, at TheHonourable Society of the Inner Temple, Treasury Office, Inner Temple, London EC4Y 7HL.In addition to the formal part of the meeting, there will be a presentation from OlegBiryulyov, who will be available to answer questions on the portfolio and performance.There will also be an opportunity to meet the Board, the Investment Manager andrepresentatives of JPMF and JPMAM. I look forward to seeing as many of you as possible atthis meeting. Shareholders are asked to submit in writing any detailed or technical questionsthat they wish to raise at the AGM in advance to the Company Secretary at 60 VictoriaEmbankment, London EC4Y 0JP. Alternatively you can lodge questions on the Company’swebsite at www.jpmrussian.co.uk.

OutlookThe price of oil is a major determining factor for the Russian economy and if recentincreases continue it seems likely that this will have a positive economic impact on theRussian economy and stock market in 2017. The Investment Manager has maintained hisconsistent approach of investing in well managed companies with strong balance sheets.He continues to believe that the equity market in Russia provides a good long terminvestment opportunity if the right stocks are selected. However, economic sanctions againstRussia remain and the political outlook is uncertain on many fronts, including theMiddle-East, USA and Europe. These significant geopolitical and economic issues willcontinue to impact the Russian market. There are some signs of improvement in thedomestic economy with a stable outlook for fiscal policy and expected growth in Russia’sGDP. Thus, the outlook remains uncertain but with some potential for upside if the oil pricecontinues to strengthen and economic and political stability are maintained.

Gill NottChairman 20th January 2017


7

Market Review and PerformanceThe Company delivered strong returns to shareholders in the financial reporting yearto 31st October 2016, as the market benefited from a degree of normalisation of trade.The Company’s net asset value (NAV) was up 56.2% on a total return basis, and the returnto shareholders was 53.1% in sterling terms. This resulted in the Company outperformingits benchmark, the MSCI Russian 10/40 Equity Indices Index by 5.4% on a net asset basis.As referred to in the Chairman’s Statement, effective from the 1st November 2016the Company’s benchmark was changed to the RTS Index (sterling).

In the market, the start of the period under review was much like the beginning of theprevious year, with a global risk sell-off and oil price weakness leading to a slide for Russianequities. The turnaround for the Russian market came with a 90% jump in the oil price(Brent crude) from the lows of February 2016 to the middle of June 2016. At the same time,sentiment was lifted by positive newsflow as economic conditions stabilised: The Rubleappreciated by 10%; the Central Bank of Russia cut rates by 1 percentage point; the currentaccount balance stayed positive and domestic consumption showed signs of bottoming out.Earnings revisions have been mixed so far, but an increase in payout ratios has helped toimprove the dividend yield of the market. The exceptionally large dividends the Companyreceived from Surgutneftegaz in the prior year, were not repeated in 2016.

Asset allocation and stock selection added 3.5% and 2.7% respectively to performance. Theunderweight positions in telecommunications and utilities were contributors to the positivestock selection performance. In the portfolio, the companies that contributed to returns overthe period were broad-based. In the financials sector, our longstanding exposure toSberbank, the dominant banking franchise in Russia and a clear market leader, was positive,as was our avoidance of VTB, the second-largest bank, which has state involvement.Similarly, we benefited from an underweight to telecoms giant Rostelecom, Russia’s leadinglong-distance telephony company, which reflected our concerns around the economics andgovernance of the business, which are not expected to change fundamentally yet. Other keypositions, in Magnit, Russia’s largest retailer, and Ros Agro, an industry leader in agriculturalcommodities and food, also contributed positively.

Detractors were also spread across companies we hold and like, and those where we wereunderweight. In the energy space, we were underweight Lukoil for most of the year givenour preference for other companies, and in materials, we held low exposure to diamondmining company Alrosa. Both of these positions hurt us when the prices moved sharply up.Another energy company, Surgutneftegas, paid a large dividend during the year, but failedto keep up with the market rally. The consumer food producer Cherkizovo was adisappointment, with its earnings outlook deteriorating over the period. Finally, internetstock Qiwi was a stock selection mistake, as we realised the company did not offer thequality and prospects we had believed.

Portfolio positioningThe widening of the Company’s Investment Policy agreed by shareholders at the Company’sAGM in March 2016 provides a broader investment universe, allowing the Company to investup to 10% of its gross assets in companies that operate or are located in former SovietRepublics. This has allowed the manager to establish positions in new names, includingtechnology companies EPAM and Luxoft, and Georgia’s TBC Bank. At the Company’s year endthese companies represented 3.71% of the portfolio value. Further acquisitions will beconsidered subject to availability and the Company’s Investment Regulations Guidelines.

Oleg I. Biryulyov

INVESTMENT MANAGER’S REPORT




INVESTMENT MANAGER’S REPORT CONTINUED

The Company has reduced exposure to Surgutneftegaz, a long-held position in the portfolio,due to the weak outlook for earnings and dividend payments.

Energy holdings are high relative to the history of the Company. Large holdings in Gazprom,Rosneft and Lukoil reflect the Manager’s view that these companies are attractively valuedwith a good outlook for dividends while a position in Novatek reflects the Manager’sexpectations of superior production growth and cash flow generation.

Investment Management Team The Company’s Investment Management Team is part of J.P. Morgan Asset Management’sEmerging Markets and Asia Pacific Equities team (EMAP). The EMAP team is headed byRichard Titherington and consists of around 100 investment professionals withapproximately USD 90 billion under management. As referred to in the Chairman’sStatement of the Company’s Half Year Report and Accounts to 30th April 2016, Sonal Tannatransferred into another area of EMAP and is no longer involved as an Investment Managerof the Company. A team of Investment professionals within EMAP are available to supportme in managing the Company’ s portfolio. In addition a succession plan helps ensurea process for the continuity of Investment Management services to the Company.

PERFORMANCE ATTRIBUTION FOR THE YEAR ENDED 31ST OCTOBER 2016

% %

Contributions to total returns

Benchmark return 50.8

Asset allocation 3.5

Stock selection 2.7

Gearing/(net cash) 0.6

Investment Manager contribution 6.8

Portfolio return 57.6

Management fee/other expenses –1.4

Return on net assets 56.2

Effect of movement in discount over the year –3.1

Return to shareholders 53.1

Source: FactSet, JPMAM and Morningstar. All figures are on a total return basis.

Performance attribution analyses how the Company achieved its recorded performancerelative to its benchmark index.

A glossary of terms and definitions is provided on page 63.


9

OutlookWe believe that economic stabilisation is underway in Russia, with positive implications forRussian equities. At the same time, we anticipate reduced volatility in the oil price over thenext 12-18 months as lower investment over the last three years starts to cap globalproduction growth. Greater stability of the oil price will help to improve the outlook for theRuble and for earnings growth, particularly in US dollar and sterling terms.

Two years on from the introduction of the sanctions, we have started to see early signs ofa recovery in domestic demand. The real estate sector was the early indicator, with demandimproving for mortgage products. The market for cars has also steadied and we expectgrowth in 2017. An increase in consumer demand should ultimately feed through intoa resumption of corporate long-term investment plans, in consumer sectors and thenbeyond, supported by falling interest rates.

We continue to see scope for reforms and hope that slowly but surely further liberalizationand restructuring of the Russian economy will take place. Privatization can be useful tool forGovernment to address budget constraints and we would anticipate a number of suchtransactions in the coming year.

On the dividend front, Russia is beginning to deliver on its promise of becoming ahigher-yielding market, and with the payout ratio less than 50% at the market level there isfurther scope for improvement. It is important to highlight that the state is becoming moreactive as a shareholder, so that state-controlled companies are now willing to commit tohigher payout ratios.

The domestic political outlook currently looks stable in Russia. Although we would expect tosee some rotation of specialists in the government and presidential administration, we thinkthe senior leadership in the country will remain unchanged for the foreseeable future.Parliament elections in September ran smoothly as expected, although surprisingly, UnitedRussia won a landslide victory despite the difficult economic environment. This should allowthe implementation of tougher reforms in the next couple of years prior to the Presidentialelections in 2018 and supports our view of a stable outlook for fiscal policy. The globalpolitical outlook would appear to be improving somewhat for Russia, although there are stillmany uncertainties whilst western sanctions continue, and the conflict in Syria heightenstensions generally.

Based on the comments above we hope that slowly but surely further liberalisation andrestructuring of the Russian economy will take place. For investors willing to accept thecurrent level of country risk, we believe that current equity valuations are attractive.

Oleg I. BiryulyovInvestment Manager 20th January 2017



2016 2015

Total returns for the year ended 31st October

Return to shareholders1 +53.1% –13.5%Return on net assets2 +56.2% –14.2%Benchmark3 +50.8% –13.4%

Net asset value, share price and discount at 31st October % change

Shareholders’ funds (£’000) 284,894 194,640 +46.4Net asset value per share 544.3p 371.9p +46.4Share price 455.0p 320.5p +42.0Exchange rate (US$ : £1) 1.22 1.54 –20.8Exchange rate (Ruble : £1) 77.27 98.60 –21.6Share price discount to net asset value per share 16.4% 13.8%Shares in issue 52,337,112 52,337,112

Revenue for the year ended 31st October

Gross revenue return (£’000) 11,109 13,598 –18.3Net revenue return on ordinary activities after taxation (£’000) 8,096 10,268 –21.2Revenue return per share 15.47p 19.60p –21.1Proposed ordinary dividend per share4 14.0p 13.0pProposed special dividend per share4 0.0p 4.0p

Net cash at 31st October5 (1.8)% (1.4)%

Ongoing Charges 1.40% 1.43%

1 Source: Morningstar.2 Source: J.P. Morgan.3 Source: MSCI. The benchmark is the MSCI Russian 10/40 Equity Indices Index in sterling terms. Effective from 1st November 2016, the Company’s benchmark is the RTS Index insterling terms (RTS).

4 2016: Dividend proposed is subject to Shareholder approval of Resolution 14 at the 2017 Annual General Meeting.5 The methodology to calculate gearing has been amended during the year therefore the comparative figure has been recalculated for comparative purposes. Please refer to theglossary of items and definitions on page 63 for the revised calculation.



SUMMARY OF RESULTS


11

PERFORMANCE

Ten Year PerformanceFIGURES HAVE BEEN REBASED TO 100 AT 31ST OCTOBER 2006

Source: Morningstar/MSCI.

JPMorgan Russian Securities – share price. JPMorgan Russian Securities – net asset value per share. Benchmark.

0

50

100

150

200

250

20162015201420132012201120102009200820072006

Performance Relative to BenchmarkFIGURES HAVE BEEN REBASED TO 100 AT 31ST OCTOBER 2006


JPMorgan Russian Securities – share price. JPMorgan Russian Securities – net asset value per share. Benchmark.

60

70

80

90

100

110

120

20162015201420132012201120102009200820072006



At 31st October 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Net assets (£’m) 265.0 403.5 142.7 260.0 376.1 311.1 298.8 332.4 236.4 194.6 284.9

Net asset value per share (p) 473.1 721.4 255.1 464.9 680.3 564.4 555.2 631.1 450.0 371.9 544.3Share price (p) 436.8 665.5 257.0 416.0 637.5 531.0 498.0 560.0 386.8 320.5 455.0

(Discount)/premium (%) (7.7) (7.7) 0.7 (10.5) (6.3) (5.9) (10.3) (11.3) (14.0) (13.8) (16.4)Gearing/(net cash) (%)1 2.8 5.1 (7.0) 0.5 (3.0) (2.1) (2.1) (2.3) (1.0) (1.4) (1.8)

Ongoing Charges (%) 1.89 1.78 2.53 1.85 1.71 1.82 1.51 1.44 1.50 1.43 1.40

Year ended 31st October

Gross revenue (£’000) 4,388 7,469 9,632 950 6,034 7,550 8,589 12,902 9,383 13,598 11,109

Revenue (loss)/returnper share (p) (1.34) (1.32) 0.95 (4.11) (0.69) (0.63) 5.03 18.14 13.38 19.60 15.47

Ordinary dividends per share (p)2 — — — — — — — 15.3 13.0 13.0 14.0

Special dividends per share (p)2 — — — — — — — — — 4.0 —

Returns rebased to 100 at 31st October 2006

Return to shareholders3 100.0 152.4 58.8 95.2 145.9 121.5 114.0 128.2 91.2 78.9 120.8

Return on net assets3 100.0 152.5 53.7 98.2 143.8 119.3 117.3 133.4 97.7 84.0 131.2

Benchmark return4 100.0 147.6 70.9 120.6 153.7 149.3 140.7 150.7 119.0 103.1 155.5

1 The methodology to calculate gearing has been amended during the year therefore the 2015 comparative figure has been recalculated for comparative purposes. Please refer tothe glossary of items and definitions on page 63 for the revised calculation.

2 2016: Dividend proposed is subject to Shareholder approval of Resolution 14 at the 2017 Annual General Meeting.3 Source: Morningstar/JPMorgan.4 Source: MSCI. The benchmark is the MSCI Russian 10/40 Equity Indices Index in sterling terms. Effective from 1st November 2016, the Company’s benchmark is the RTS Index in

sterling terms (RTS).



TEN YEAR FINANCIAL RECORD


13

2016 2015 Valuation ValuationCompany Sector £’000 %1 £’000 %1

Sberbank Rossii2 Financials 38,666 13.8 25,019 13.0 Gazprom3 Energy 30,364 10.9 11,271 5.9 Magnit Consumer Staples 27,164 9.7 18,410 9.6 Rosneft GDR Energy 19,544 7.0 12,268 6.4 Lukoil ADR Energy 18,883 6.7 8,094 4.2 Novatek GDR4 Energy 17,717 6.3 — —Moscow Exchange Financials 15,447 5.5 15,173 7.9 Alrosa AO5 Materials 13,330 4.8 2,351 1.2 MMC Norilsk Nickel ADR Materials 12,116 4.3 11,587 6.0 Tatneft6 Energy 11,398 4.1 9,570 5.0

Total7 204,629 73.1

1 Based on total investments of £279.9m (2015: £191.9m).2 Includes preference shares valued at £27,501,000.3 Includes ADR valued at £27,205,000.4 Not held in the portfolio at 31st October 2015.5 Not included in the ten largest equity investments at 31st October 2015.6 Includes ADR valued at £634,000 and preference shares valued at £10,764,000.7 At 31st October 2015, the value of ten largest equity investments amounted to £137.2m representing 71.5% of total investments.

See glossary of terms on page 63 for definition of ADR and GDR.

TEN LARGEST INVESTMENTS AT 31ST OCTOBER



31st October 2016 31st October 2015 Portfolio Benchmark Portfolio Benchmark %1 % %1 %

Energy 36.5 40.1 31.3 41.1Financials 20.7 17.5 20.9 18.4Materials 15.3 17.8 18.7 13.6Consumer Staples 14.9 8.5 18.3 8.7Real Estate2 3.5 — — —Telecommunication Services 2.6 11.3 1.7 13.8Information Technology 2.4 — 4.3 —Consumer Discretionary2 2.2 — 3.4 —Health Care 1.6 — 0.9 —Industrials 0.3 — 0.5 —Utilities — 4.8 — 4.4

Total 100.0 100.0 100.0 100.0

1 Based on total investments of £279.9m (2015: £191.9m).2 Etalon GDR was reclassified to Real Estate from Consumer Discretionary as at 31st October 2016.


SECTOR ANALYSIS


15

ValuationCompany £’000

ValuationCompany £’000

EnergyGazprom1 30,364Rosneft GDR 19,544Lukoil ADR 18,883Novatek GDR 17,717Tatneft2 11,398Nostrum Oil & Gas 2,901Volga Gas 1,256Total Energy 102,063

FinancialsSberbank Rossii3 38,666Moscow Exchange 15,447TBC Bank 3,806Total Financials 57,919

MaterialsAlrosa AO 13,330MMC Norilsk Nickel ADR 12,116OAO Severstal GDR 10,253Phosagro GDR 4,132Acron 3,067Total Materials 42,898

Consumer StaplesMagnit 27,164Ros Agro GDR 8,483X5 Retail GDR 5,934Total Consumer Staples 41,581

Real EstateEtalon GDR 6,025LSR GDR 3,695Total Real Estate 9,720

Telecommunication ServicesMegafon GDR 7,423Total Telecommunication Services 7,423

Information TechnologyLuxoft 3,476EPAM systems 3,282Total Information Technology 6,758

Consumer DiscretionarySollers 3,482M Video 2,662Total Consumer Discretionary 6,144

Health CareMD Medical GDR 4,359Total Health Care 4,359

IndustrialsGlobal Ports Investments GDR 1,000Total Industrials 1,000Total Investment Portfolio 279,865

See Glossary for definition of ADR/GDR.1 Includes ADR valued at £27,205,000.2 Includes ADR valued at £634,000 and preference shares valued at £10,764,000.3 Includes preference shares valued at £27,501,000.

LIST OF INVESTMENTS AT 31ST OCTOBER 2016



The aim of the Strategic Report is to provide shareholders with theability to assess how the Directors have performed their duty topromote the success of the Company during the year under review.To assist shareholders with this assessment, the Strategic Reportsets out the structure and objective of the Company, its investmentpolicies and risk management, investment limits and restrictions,performance and key performance indicators, share capital,principal risks and how the Company seeks to manage those risks,the Company’s environmental, social and ethical policy, futuredevelopments and long term viability.

Business ModelJPMorgan Russian Securities plc is an investment trust and hasa premium listing on the London Stock Exchange. Its objective is toprovide shareholders with capital growth, primarily from investingin quoted Russian securities. In seeking to achieve this objective theCompany employs J.P. Morgan Funds Limited (‘JPMF’ or the‘Manager’) which in turn delegates portfolio management toJPMorgan Asset Management (UK) Limited (‘JPMAM’) to activelymanage the Company’s assets. The Board has determinedinvestment policies and related guidelines and limits, as describedbelow. It aims to outperform the MSCI Russian 10/40 Equity IndicesIndex in sterling terms, in the long term with net dividendsreinvested, expressed in sterling terms. The Company changed itsbenchmark to the RTS Index in sterling terms effective from1st November 2016.

The Company is an investment company within the meaning ofSection 833 of the Companies Act 2006 and has been approved byHMRC as an investment trust (for the purposes of Sections 1158 and1159 of the Corporation Tax Act 2010). As a result the Company isnot liable to taxation on capital gains. The Directors have no reasonto believe that approval will not continue to be retained.

A review of the Company’s activities and prospects is given in theChairman’s Statement on pages 3 to 6, and in the InvestmentManager’s Report on pages 7 to 9.

Investment Policies and Risk Management In order to achieve its objective and manage risk, the Companyinvests in a diversified portfolio of investments primarily in quotedRussian securities or other companies which operate principally inRussia. The Company may also invest up to 10% of its gross assets incompanies that operate or are located in former Soviet UnionRepublics. The number of investments in the portfolio will normallyrange between 20 and 50. The investment portfolio is managed bya Russian fund manager, currently based in London, and fullysupported by a global emerging markets team, including sectorspecialists. The Board also discusses the economy and politicaldevelopments of Russia in depth at Board meetings and considersthe possible implications for the investment portfolio.

Investment Limits and Restrictions The Board seeks to manage some of the Company’s risks byimposing various investment limits and restrictions.

• No more than 10% of the Company’s gross assets are to beinvested in companies that operate or are located in formerSoviet Union Republics.

• The Company will not normally invest in unlisted securities.

• At the time of purchase, the maximum permitted exposure toeach individual company is 15% of the Company’s gross assets.

• The Company will not normally invest in derivatives.

• The Company will utilise liquidity and borrowings in a range of10% net cash to 15% geared in typical market conditions.

• No more than 15% of gross assets are to be invested in otherUK listed investment companies (including investment trusts).

Compliance with the Board’s investment restrictions and guidelinesis monitored continuously by the Manager and is reported to theBoard on a monthly basis.

These limits and restrictions may be varied by the Board at any timeat its discretion.

The economic sanctions introduced by the USA and European Unionagainst Russia and Crimea in 2014 continue and were furtherextended in 2016. The Manager undertakes regular checks of holdingsto ensure compliance and reports to the Board. The Board has alsoimplemented a rapid response communication process with theManager, which allows the Board to receive immediate updates fromthe Manager and take decisions as quickly as possible.

Active Fund Management RationaleJPMAM believes that the Russian market is inefficient and that thisis demonstrated by the high and variable volatility of many marketsectors and individual companies. Although corporate disclosureand transparency is improving, there still remain areas where theinefficiencies in this region can be exploited offering opportunitiesto experienced, well-informed investors.

JPMAM’s investment process has been specifically designed foremerging markets and has been refined over 20 years of activemanagement experience in the region.

Highlights of the investment strategy are:

• Inefficient, immature emerging markets reward active investmentmanagement not indexation.

• Identifying growth companies that are well managed to maximiseshareholder returns brings outperformance through fundamentalbottom-up research.

• Valuation disciplines avoid overpaying for growth.


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• JPMAM believes that assets are best managed by specialists fromthe markets and regions in which they have expertise and theyhave therefore established a strong presence around the region.Company visits and local knowledge are also key.

JPMAM has managed money in Russia since 1994. JPMAM’sEmerging Markets and Asia Pacific Group is responsible formanaging all emerging market equity. The approximately 90 teammembers are located in four offices, managing US$50 billion forclients globally.

PerformanceIn the year ended 31st October 2016, the Company produced a totalreturn to shareholders of +53.1% and a total return on net assets of+56.2%. This compares with the return on the Company’sbenchmark of +50.8%. As at 31st October 2016, the value of theCompany’s investment portfolio was £279,865,000. The InvestmentManager’s Report on pages 7 to 9 includes a review ofdevelopments during the year.

The results of the investment strategy, as detailed above, and theperformance of the Company against its benchmark, as identified onpage 2 are regularly reviewed by the Board together with datarelating to the performance of the Company’s Peers and feedbackfrom some of the major shareholders. The Board also considersfactors likely to affect the future performance of the Company.

Total Return, Revenue and DividendGross return for the year totalled £106,695,000 (2015: £29,821,000loss) and net return after deducting management fee, administrativeexpenses, and taxation, amounted to £102,291,000 (2015:£34,414,000 loss). Net revenue after taxation for the year amountedto £8,096,000 (2015: £10,268,000).

The Directors recommend a final ordinary dividend of 8.0 pence pershare as detailed in the Chairman’s Statement on page 4.

Key Performance Indicators (‘KPIs’) The Board uses a number of financial KPIs to monitor and assess theperformance of the Company. The principal KPIs are:

• Performance against the benchmark The principal objective is to achieve capital growth. However, theBoard also monitors performance against a benchmark index.Please refer to page 12 for details of the Company’s performanceagainst the MSCI Russian 10/40 Equity Indices in sterling terms.The Company’s benchmark is the RTS index effective from1st November 2016 as detailed in the Chairman’s Statementon page 3.

• Performance against the Company’s peers The Board also monitors the performance relative to a broadrange of competitor funds. The Company’s performance for thecurrent period is comparable to those of its peers.

• Performance attributionThe purpose of performance attribution analysis is to assess howthe Company achieved its performance relative to its benchmarkindex, i.e. to understand the impact on the Company’s relativeperformance of the various components such as asset allocationand stock selection. Please refer to page 8 for the Company’sperformance attribution for the year ended 31st October 2016.

• Share price (discount)/premium to net asset value (‘NAV’) per shareThe Board has adopted a share repurchase policy which seeks toaddress imbalances in the supply of and demand for theCompany’s shares in the market and thereby reduce the volatilityand absolute level of the discount to NAV per share at which theCompany’s shares trade. The Boards implementation of the policyis subject to market conditions. In the year ended 31st October2016, the shares traded at a discount between 13.8% and 18.2%based on month end data. See the Discount Control section ofChairman’s statement for further detail see page 5.

(Discount)/Premium Performance

Source: Datastream.

JPMorgan Russian Securities – share price discount/premium to NAV (monthend data points).

• Ongoing ChargesThe Ongoing Charges represent the Company’s management feeand all other operating expenses excluding finance costs,expressed as a percentage of the average daily net assets duringthe year. The Ongoing Charges for the year ended 31st October2016 were 1.40% (2015: 1.43%). The Board reviews each year ananalysis which shows a comparison of the Company’s OngoingCharges and its main expenses with those of its peers.

Share CapitalDuring the year, the Company did not make any market purchases ofits own shares. Since the year end the Company has notrepurchased any ordinary shares. Further details regarding theCompany’s purchase of its own shares can be seen in the Chairman’sreport on page 5.

A resolution to renew the authority to repurchase shares at adiscount to NAV is due to be put to shareholders at the forthcomingAnnual General Meeting.

The Company did not issue any new shares during the year.

–20

–15

–10

–5

0

5

20162015201420132012201120102009200820072006



The Modern Slavery Act 2015 (the ‘MSA’)The MSA requires companies to prepare a slavery and humantrafficking statement for each financial year of the organisation.As the Company has no employees and does not supply goodsand services, the MSA does not apply directly to it. The MSArequirements more appropriately relate to JPMF and JPMAM.JPMorgan’s statement on Human Rights can be found on thefollowing website: www.jpmorganchase.com/corporate/About-JPMC/ab-human-rights.htm

Principal RisksThe Directors confirm that they have carried out an assessment ofthe principal risks facing the Company, including those that wouldthreaten its business model, future performance, solvency orliquidity. The risks identified and the ways in which they aremanaged or mitigated are summarised as follows:

With the assistance of the Manager, the Board has drawn up a riskmatrix, which identifies the key risks to the Company and theCompany’s actions to manage the risks.

In the year under review the Board monitored the risks arising whichincluded continuing sanctions against Russia and the significant fallsin the price of oil and valuation of the Ruble which have impactedmarket sentiment.

These key risks fall broadly under the following categories:

• Investing in Russia: Investors should note that there aresignificant risks inherent in investing in Russian securities nottypically associated with investing in securities of companies inmore developed countries. In terms of gauging the economic andpolitical risk of investing in Russia, it frequently appears in thehigher risk categories when compared with most Westerncountries. The value of Russian securities, and therefore the netasset value of the Company, may be affected by uncertaintiessuch as economic, political or diplomatic developments, socialand religious instability, taxation and interest rates, currencyrepatriation restrictions, crime and corruption and developmentsin the law or regulations in Russia and, in particular, the risks ofexpropriation, nationalisation and confiscation of assets andchanges in legislation relating to the level of foreign ownership.

The Board, with the assistance of the Manager, monitors theCompany’s activities to ensure that they remain compliant withthe current sanctions regime including the specific requirementsapplicable to the Manager as a company subject to the laws of theUnited States of America. The Board acknowledges the negativeimpact of sanctions on the wider market although the currentsanctions regime has not prevented the Company from operatingwithin its investment guidelines.

• Share Price Discount to Net Asset Value (‘NAV’) per Share: If theshare price of an investment trust is lower than the NAV pershare, the shares are said to be trading at a discount. Thewidening of the discount can be seen as a disadvantage ofinvestment trusts which could discourage investors. Although it iscommon for an investment trust’s shares to trade at a discount,the current sanctions regime and recent large falls in the price ofoil and value of the Ruble have negatively impacted marketsentiment. The Board monitors the Company’s discount level andseeks, where deemed prudent, to address imbalances in thesupply and demand of the Company’s shares through aprogramme of share buybacks.

• Investment Under Performance and Strategy: An inappropriateinvestment strategy, for example asset allocation or the level ofgearing, may lead to underperformance against the Company’sbenchmark index and peer companies. The Board manages theserisks by diversification of investments through its investmentrestrictions and guidelines, which are monitored and reported onby the Manager. The Manager provides the Directors with timelyand accurate management information, including performancedata and attribution analyses, revenue estimates, liquidity reportsand shareholder analyses. The Board monitors the implementationand results of the investment process with the investmentmanagers, who attend all Board meetings, and reviews data whichshow statistical measures of the Company’s risk profile.

Possible actions include changing the portfolio manager orselecting another manager.

• Failure of Investment Process: A failure of process could lead tolosses. The Manager mitigates this risk through internal controlsand monitoring. Fraud requires immediate notification to theBoard and regular reports are provided on control processes.

• Loss of Investment Team or Investment Manager: The suddendeparture of the investment manager or several members of thewider investment management team could result in a short termdeterioration in investment performance. The Manager takessteps to reduce the likelihood of such an event by ensuringappropriate succession planning and the adoption of a teambased approach, as well as special efforts to retain key personnel.

• Operational and Cyber Crime: Disruption to, or failure of, theManager’s accounting, dealing or payments systems or theDepositary or custodian’s records could prevent accurate reportingand monitoring of the Company’s financial position. Under theterms of its agreement, the Depositary has strict liability for theloss or misappropriation of assets held in custody. See note 19(c)for further details on the responsibilities of the Depositary. Details


BUSINESS REVIEW CONTINUED


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of how the Board monitors the services provided by JPMF and itsassociates and the key elements designed to provide effectiveinternal control are included within the Internal Control section ofthe Corporate Governance report on pages 28 and 29. The threatof Cyber attack is increasing and regarded as having the ability tocause equivalent disruption to the Company’s business as moretraditional business continuity and security threats. The Companybenefits from JPMorgan’s Cyber Security Programme. Theinformation technology controls around the physical security ofJPMorgan’s data centres, security of its networks and security of itstrading applications are tested by Deloitte and reported every sixmonths against the AAF standard.

• Board Relationship with Shareholders: The risk that theCompany’s strategy and performance does not align withshareholders expectations is addressed by the Manager andincludes the organisation of a programme of visits to majorshareholders, and the provision of an extensive range of investorinformation including nationwide presentations by sales teams.Feedback from shareholders is received directly and via brokerswhich is fed back to the Board regularly.

• Political and Economic: Changes in financial or tax legislation,including in the European Union, may adversely affect theCompany. The Manager makes recommendations to the Board onaccounting, dividend and tax policies and the Board seeks externaladvice where appropriate. In addition, the Company is subject toadministrative risks, such as the imposition of restrictions on thefree movement of capital. A widening of the capital controlsrecently introduced by the Russian Government could negativelyimpact the Company. The introduction of limitations on the abilityof Russian companies to distribute dividends to foreign companiescould materially reduce the Company’s revenue and amountavailable for distribution to shareholders.

• Regulatory and Legal: Breach of regulatory rules could lead tosuspension of the Company’s Stock Exchange listing, financialpenalties, or a qualified audit report. Loss of investment truststatus could lead to the Company being subject to tax on capitalgains. The Directors seek to comply with all relevant regulationand legislation and rely on the services of its Company Secretary,the Manager, and its professional advisors to monitor compliancewith all relevant requirements.

• Market and Financial: The Company’s assets consist of listedsecurities and it is therefore exposed to movements in the pricesof individual securities and the market generally. The Boardconsiders asset allocation and stock selection on a regular basisand has set investment restrictions and guidelines, which aremonitored and reported on by the Manager. The recent significant

falls in the price of oil and devaluation of the Ruble have hada negative impact on the Company’s NAV. The financial risks facedby the Company include market price risk, interest rate risk,foreign currency risk, liquidity risk and credit risk. Further detailsare disclosed in note 19 on pages 53 to 57. The Manager regularlymonitors the liquidity of the portfolio including determining themarket valuation of securities held, the average daily volume andnumber of days to liquidate a holding. As can be seen in Note 18on page 52, all the Company’s assets are categorised as Level 1 asthey have quoted prices in an active market.

Board DiversityWhen recruiting a new Director, the Board’s policy is to appointindividuals on merit. Diversity is important in bringing anappropriate range of skills and experience to the Board.

At 31st October 2016, there were three male Directors and twofemale Directors on the Board. The Company has no employees andtherefore there is nothing further to report in respect of diversitywithin the Company.

Employees, Social, Community and Human Rights IssuesThe Company is managed by JPMF, has no employees and all of itsDirectors are non-executive, the day to day activities being carriedout by third parties. There are therefore no disclosures to be madein respect of employees. The Board notes the JPMAM policystatements in respect of Social, Community, Environmental andHuman Rights issues, as outlined below.

Social, Community, Environmental and Human RightsJPMAM believes that companies should act in a socially responsiblemanner. Although our priority at all times is the best economic interestsof our clients, we recognise that, increasingly, non-financial issues suchas social and environmental factors have the potential to impact theshare price, as well as the reputation of companies. Specialists withinJPMAM’s environmental, social and governance (‘ESG’) team are taskedwith assessing how companies deal with and report on social andenvironmental risks and issues specific to their industry.

JPMAM is also a signatory to the United Nations Principles of ResponsibleInvestment, which commits participants to six principles, with the aimof incorporating ESG criteria into their processes when making stockselection decisions and promoting ESG disclosure. Our detailed approachto how we implement the principles is available on request.

Future Developments The future development of the Company is much dependent uponthe success of the Company’s investment strategy in the light ofeconomic and equity market developments. The Chairman andInvestment Manager discusses the outlook in their respectivereports on pages 3 and 7.



Long Term ViabilityTaking account of the Company’s current position, the principalrisks that it faces and their potential impact on its futuredevelopment and prospects, the Directors have assessed theprospects of the Company, to the extent that they are able to do so,over the next five years. They have made that assessment byconsidering those principal risks, the Company’s investmentobjective and strategy, the investment capabilities of the Managerand the current outlook for the Russian economy and equitymarket. It has also taken into account the fact that the Companyhas a continuation vote at the 2017 AGM and, with input from theCompany’s major shareholders and its brokers, the likelihood ofshareholders voting in favour of continuation. Based on thatinformation the Directors do not think that the continuation votewill impact on the Company’s long term viability. In determining theappropriate period of assessment the Directors had regard to their

view that, given the Company’s objective of achieving long termcapital growth, shareholders should consider the Company as along term investment proposition. This is consistent with adviceprovided by independent financial advisers and wealth managers,that investors should consider investing in equities for a minimumof five years. Thus the Directors consider five years to be anappropriate time horizon to assess the Company’s viability. TheDirectors confirm that they have a reasonable expectation that theCompany will be able to continue in operation and meet itsliabilities as they fall due over the five year period of assessment.

By order of the Board Paul Winship, ACIS for and on behalf of JPMorgan Funds Limited, Secretary

20th January 2017


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Governance

BOARD OF DIRECTORS

Robert Jeens (Audit Committee Chairman)*†A Director since 2011.

Last reappointed to the Board: March 2015.

Following 12 years with Touche Ross & Co where he was an audit partner, Mr Jeens movedto Kleinwort Benson Group plc, becoming finance director in 1992, before becoming groupfinance director of Woolwich plc for three years until 1999. Since then he has held a portfolioof non-executive appointments and is currently chairman of Allianz Technology Trust plc anda director of Henderson Group plc.

Connections with Manager: None.

Shared directorships with other Directors: None.

Shareholding in Company: 15,000.

Alexander Easton*†A Director since 2010.


He was formerly the head of European equities at UBS Investment Bank and managing directorresponsible for UBS Brunswick (Russia). He is currently a partner in a number of Russianventure capital firms.




Gill Nott (Chairman of the Board and Nomination Committee)†A Director since 2011.

Last reappointed to the Board: March 2015. Appointed as Chairman 12th June 2015.

Mrs Nott spent the majority of the first 27 years of her career working in the energy sector.In 1994 she became CEO of ProShare. Due to her work in the retail savings sector, she spentsix years on the Board of the Financial Services Authority from 1998 to 2004. Mrs Nott has helda portfolio of non-executive positions, particularly in the closed-end fund sector, over the last15 years. She is a non-executive director of Premier Energy and Water Trust plc andPEWT Securities 2020 plc.






Governance continued

BOARD OF DIRECTORS CONTINUED

George Nianias*† A Director since 2008.


He is the founder and group chairman of Denholm Hall Group. George has a close associationwith Russia and has also been financial adviser to several eastern European cities includingKrakow, St. Petersburg and Moscow.



Shareholding in Company: Nil.

* Member of the Audit Committee.

† Member of the Nomination Committee.

Tamara Sakovska*†Appointed 1st August 2016.

Tamara is an investment professional with significant experience in developed and emergingmarkets. She is currently an investment partner at Global Family Partners in London.Her previous role was Head of Origination, Europe in the private equity team at Eton ParkInternational LLP. Before joining Eton Park, Tamara worked at Permira in London and atGoldman, Sachs & Co. in New York. Tamara is a native Russian speaker.



Shareholding in Company: Nil.


23

The Directors present their report and the audited financialstatements for the year ended 31st October 2016.

Management of the CompanyThe Manager and Company Secretary to the Company is JPMorganFunds Limited (‘JPMF’). Portfolio Management is delegated toJPMorgan Asset Management UK Limited (JPMAM).

JPMF and JPMAM are wholly-owned subsidiary of JPMorgan Chase& Co which, through other subsidiaries, also provides accounting,banking, dealing and custodian services to the Company.

The Board conducts a formal evaluation of the performance of, andcontractual relationship with, the Manager on an annual basis. Partof this evaluation includes a consideration of the management feesand whether the service received is value for money forshareholders. No separate management engagement committee hasbeen established because all Directors are considered to beindependent of the Manager and, given the nature of the Company’sbusiness, it is felt that all Directors should take part in the reviewprocess.

The Board has thoroughly reviewed the performance of theManager in the course of the year. The review covered theperformance of the Manager, its management processes,investment style, resources and risk controls and the quality ofsupport that the Company receives from the Manager including themarketing support provided. The Board is of the opinion that thecontinuing appointment of the Manager is in the best interests ofshareholders as a whole. Such a review is carried out on an annualbasis.

Management Agreement The current Management Agreement was entered into with effectfrom 1st July 2014 following implementations of the AlternativeFund Manager Directive.

JPMF is employed under a contract which can be terminated on90 days’ notice, without penalty. The Manager may also terminatethe contract on 90 days’ notice if in its sole opinion there has beena loss of confidence between the Manager and the Company so as tomake the relationship unworkable. If the Company wishes toterminate the contract on less than 90 days’ notice, the balance ofthe 90 days’ remuneration is payable by way of compensation.

The Manager is remunerated at a rate of 1.0% per annum of theCompany’s net assets, payable monthly in arrears.

Investments on which the Manager earns a separate managementfee are excluded from the Company’s net assets for the purpose ofcalculating the management fee. No performance fee is payable.

The Alternative Investment Fund Managers Directive(‘AIFMD’)JPMF, an affiliate of JPMAM, has been appointed as the Company’salternative investment fund manager (‘AIFM’). JPMF has beenapproved as an AIFM by the Financial Conduct Authority (‘FCA’).For the purposes of the AIFMD the Company is an alternativeinvestment fund (‘AIF’).

JPMF has delegated responsibility for the day to day management ofthe Company’s portfolio to JPMAM. JPMF is required to ensure thata depositary is appointed to the Company. The Company thereforehas appointed BNY Mellon Trust and Depositary (UK) Limited (‘BNY’)as its depositary. BNY has delegated its safekeeping function to thecustodian, JPMorgan Chase Bank, N.A., however, BNY remainsresponsible for the oversight of the custody of the Company’s assetsand for monitoring its cash flows.

The AIFMD requires certain information to be made available toinvestors in AIFs before they invest and requires that materialchanges to this information be disclosed in the annual report ofeach AIF. Investor Disclosure Documents, which set out informationon the Company’s investment strategy and policies, leverage, risk,liquidity, administration, management, fees, conflicts of interest andother shareholder information are available on the Company’swebsite at www.jpmrussian.co.uk

There have been no material changes (other than those reflected inthese financial statements) to this information requiring disclosure.Any information requiring immediate disclosure pursuant to theAIFMD will be disclosed to the London Stock Exchange througha primary information provider. As an authorised AIFM, JPMF willmake the requisite disclosures on remuneration levels and policiesto the FCA at the appropriate time.

Going Concern In assessing the Company’s ability to continue as a going concernthe Directors have considered the Company’s investment objective(see page 16), risk management policies (see pages 53 to 57), capitalmanagement (see note 20), the nature of the portfolio andexpenditure projections, and believe that the Company hasadequate resources, an appropriate financial structure and suitablemanagement arrangements in place to continue in operationalexistence for the foreseeable future. For these reasons, theDirectors believe that it is appropriate to continue to adopt thegoing concern basis in preparing the accounts. The Directorsconsidered the current political environment in Russia and theimpact of sanctions in making its assessment.

A resolution that the Company continue as an investment trust willbe put to shareholders at the Annual General Meeting in 2017 andevery five years thereafter. See the Chairman’s Statement forfurther details of the Continuation vote, page 4.

DIRECTORS’ REPORT



Directors The Directors of the Company who held office at the end of the yearare detailed on pages 21 and 22.

Details of Directors’ beneficial shareholdings may be found in theDirectors’ Remuneration Report on page 31. No changes have beenreported to the Directors’ shareholdings since the year end.

In accordance with corporate governance best practice, all Directorswill retire by rotation at the forthcoming Annual General Meetingand, being eligible, will offer themselves for reappointment. Havingbeen appointed to the Board on 1st August 2016 Tamara Sakovskawill be standing for appointment for the first time. The NominationCommittee, having considered their qualifications, performance andcontribution to the Board and its committees, confirms that eachDirector continues to be effective and demonstrates commitment tothe role and the Board recommends to shareholders that they beappointed/reappointed.

Director Indemnification and InsuranceAs permitted by the Company’s Articles of Association, the Directorshave the benefit of a deed of indemnity which is a qualifying thirdparty indemnity, as defined by Section 234 of the Companies Act2006. The deeds of indemnity were executed on 21st January 2011and are currently in force.

An insurance policy is maintained by the Company whichindemnifies the Directors of the Company against certain liabilitiesarising in the conduct of their duties. There is no cover againstfraudulent or dishonest actions.

Disclosure of information to Auditors In the case of each of the persons who are Directors of the Companyat the time when this report was approved:

(a) so far as each of the Directors is aware, there is no relevantaudit information (as defined in the Companies Act) of whichthe Company’s auditors are unaware, and

(b) each of the Directors has taken all the steps that he/sheought to have taken as a Director in order to make himself/herself aware of any relevant audit information and toestablish that the Company’s auditors are aware of thatinformation.

The above confirmation is given and should be interpretedin accordance with the provision of Section 418(2) of the CompaniesAct 2006.

Independent AuditorErnst & Young LLP have expressed their willingness to continue inoffice as auditor to the Company, and resolutions proposing their

reappointment and authorising the Directors to determine theirremuneration for the ensuing year will be put to shareholders at theAnnual General Meeting.

Annual General MeetingNOTE: THIS SECTION IS IMPORTANT AND REQUIRES YOURIMMEDIATE ATTENTION. If you are in any doubt as to theaction you should take, you should seek your own personalfinancial advice from your stockbroker, bank manager,solicitor or other financial adviser authorised under theFinancial Services and Markets Act 2000.

Resolutions relating to the following items of special business will beproposed at the forthcoming Annual General Meeting:

(i) Authority to allot relevant securities and disapplypre-emption rights (resolutions 11 & 12)

The Directors will seek renewal of the authority to issue up to2,616,856 new shares or shares held in Treasury other than by a prorata issue to existing shareholders up to an aggregate nominalamount of £26,169, such amount being equivalent to approximately5% of the current issued share capital. The full text of theresolutions is set out in the Notice of Meeting on pages 60 to 61.

It is advantageous for the Company to be able to issue new sharesto investors purchasing shares through the JPMAM savings productsand also to other investors when the Directors consider that it is inthe best interest of shareholders to do so. Any such issues wouldonly be made at prices greater than the NAV, thereby increasing theassets underlying each share.

(ii) Authority to repurchase the Company’s shares forcancellation (resolution 13)

The authority to repurchase up to 14.99% of the Company’s issuedshare capital, granted by shareholders at the 2016 Annual GeneralMeeting, will expire on 3rd March 2017 unless renewed at the 2017Annual General Meeting. The Directors consider that the renewal ofthe authority is in the interests of shareholders as a whole, as therepurchase of shares at a discount to the underlying NAV enhancesthe NAV of the remaining shares.

The full text of the resolution is set out in the Notice of AnnualGeneral Meeting on pages 60 to 61. Repurchases will be made at thediscretion of the Board and will only be made in the market at pricesbelow the prevailing NAV per share as and when market conditionsare appropriate.

(iii) Continuation resolution – Ordinary Resolution(resolution 14)

The Directors seek the shareholders approval to the ordinaryresolution for the Company to continue as an investment trust fora further five years.


DIRECTORS’ REPORT CONTINUED


25

RecommendationThe Board considers that resolutions 11 to 14 are likely to promotethe success of the Company and are in the best interests of theCompany and its shareholders as a whole. The Directorsunanimously recommend that you vote in favour of the resolutionsas they intend to do in respect of their own beneficial holdingswhich amount in aggregate to 30,018 shares representingapproximately 0.1% of the voting rights in the Company.

Corporate Governance Statement

Compliance The Company is committed to high standards of corporategovernance. This statement, together with the Statement ofDirectors’ Responsibilities in respect of the Accounts on page 33,indicates how the Company has applied the principles of goodgovernance of the Financial Reporting Council’s UK CorporateGovernance Code (the ‘UK Corporate Governance Code’) and theAIC’s Code of Corporate Governance, (the ‘AIC Code’), whichcomplements the UK Corporate Governance Code and providesa framework of best practice for investment trusts.

The Board is responsible for ensuring the appropriate level ofcorporate governance and considers that, apart from certainmatters noted below, the Company has complied with the bestpractice provisions of the UK Corporate Governance Code, insofaras they are relevant to the Company’s business, and the AIC Codethroughout the year under review, except for the following areas:

— Role of the CEO, as the Company does not appoint a CEO;

— Executive Director remuneration as the Company does notappoint executive directors;

— Internal audit function as the Company relies on the internalaudit department of the manager; and

— Nomination of a Senior Independent Director. The Board hasconsidered whether a senior independent director should beappointed and has concluded that, as the Board consists entirelyof non-executive directors, this is unnecessary at present.

Role of the Board A management agreement between the Company and JPMorganFunds Limited (‘JPMF’) (the Manager), sets out the matters overwhich the Manager has authority. This includes management of theCompany’s assets and the provision of accounting, companysecretarial, administration, and some marketing services. All othermatters are reserved for the approval of the Board. A formalschedule of matters reserved to the Board for decision haspreviously been approved. This includes determination andmonitoring of the Company’s investment objectives and policy andits future strategic direction, gearing policy, management of the

capital structure, appointment and removal of third party serviceproviders, review of key investment and financial data and theCompany’s corporate governance and risk control arrangements.The Board conducts a formal evaluation of the Manager every year.

At each Board meeting, Directors’ interests are considered. Theseare reviewed carefully, taking into account the circumstancessurrounding them, and, if considered appropriate, are approved.It was resolved that there were no actual or indirect interests ofa Director which conflicted with the interests of the Company, whicharose during the year.

Following the introduction of The Bribery Act 2010, the Board hasadopted appropriate procedures designed to prevent bribery.It confirms that the procedures have operated effectively during theyear under review.

The Board meets at least quarterly during the year and additionalmeetings are arranged as necessary. Full and timely information isprovided to the Board to enable it to function effectively and toallow Directors to discharge their responsibilities.

There is an agreed procedure for Directors to take independentprofessional advice if necessary and at the Company’s expense. Thisis in addition to the access that every Director has to the advice andservices of the Company Secretary, JPMF, which is responsible tothe Board for ensuring that the Board procedures are followed andthat applicable rules and regulations are complied with.

Board Composition Following Lysander Tennant’s retirement as a Director at theCompany’s AGM in March 2016, an independent non-executivesearch consultancy (Nurole) identified Tamara Sakovska as asuitably qualified replacement and she was appointed as a newDirector of the Company effective from 1st August 2016.

The Board currently consists of five non-executive Directors, all ofwhom are regarded by the Board as independent. The Chairman’sindependence was assessed upon her appointment and annuallythereafter. The Directors have a breadth of investment knowledge,business and financial skills and experience relevant to the Company’sbusiness and brief biographical details of each Director are set out onpages 21 and 22. There have been no changes to the Chairman’s othersignificant commitments during the year under review.

A review of Board composition and balance is included as part of theannual performance evaluation of the Board, details of which maybe found below.

Tenure Directors are initially appointed until the following Annual GeneralMeeting when, under the Company’s Articles of Association, it isrequired that they be elected by shareholders. Thereafter, Directorsstand for annual re-election, following the Board’s adoption ofcorporate governance best practice. Subject to the performance



evaluation carried out each year, the Board will agree whether it isappropriate for the Director to seek an additional term. The Boarddoes not believe that length of service in itself necessarilydisqualifies a Director from seeking re-election but, when makinga recommendation, the Board will take into account therequirements of the UK Corporate Governance Code, including theneed to periodically refresh the Board and its sub-Committees.Notwithstanding the fact that George Nianias will have served asa director for nine years at the date of the 2017 AGM, theNomination Committee agreed that he continued to remainindependent in character and judgement. Accordingly, due to hissignificantly positive contribution to the Company arising from hisbase in Moscow and knowledge of the market, the NominationCommittee agreed that it would be in the Company’s best interestsif George Nianias’ appointment as a director continued.

The Nomination Committee, having considered their qualifications,performance and contribution to the Board and its Committees,confirms that Mrs Nott, Ms Sakovska and Messrs Easton, Jeens andNianias continue to be effective and demonstrate commitment tothe role. The Board recommends to shareholders that all the aboveDirectors be elected/re-elected.

The terms and conditions of Directors’ appointments are set out informal letters of appointment, copies of which are available forinspection on request at the Company’s registered office and atthe AGM.

Meetings and Committees The Board delegates certain responsibilities and functions tocommittees. Details of membership of committees are shown withthe Directors’ profiles on pages 21 and 22.

The table below details the number of Board, Audit and NominationCommittee meetings attended by each Director. During the yearthere were five Board meetings, two Audit Committee meetings andone Nomination Committee meeting.

Audit NominationBoard Committee Committee

Meetings Meetings MeetingsDirector Attended Attended Attended

Gill Nott1 5 2 1Alexander Easton 5 2 1Robert Jeens 5 2 1George Nianias 5 2 1Lysander Tennant1 3 1 0Tamara Sakovska 1 0 11 Attended the Audit Committee meetings by invitation.

Training and Appraisal On appointment, the Manager and Company Secretary provide allDirectors with induction training. Thereafter regular briefings areprovided on changes in regulatory requirements that affect theCompany and the Directors. Directors are encouraged to attendindustry and other seminars covering issues and developmentsrelevant to investment trusts. Regular reviews of the Directors’training needs are carried out by the Chairman, and of the Boardchairman by the Nomination Committee Chairman by means of theevaluation process detailed below.

Board CommitteeNomination Committee The Nomination Committee, chaired by Gill Nott, consists of allDirectors and meets at least annually to ensure that the Board hasthe balance of skills and experience to carry out its fiduciary dutiesand to select and propose suitable candidates, for appointmentwhen necessary. The appointment process takes account of thebenefits of diversity, including gender. A variety of sources,including the use of external recruitment consultants, may be usedto ensure that a wide range of candidates is considered.

The Board’s policy on diversity, including gender, is to take accountof the benefits of these during the appointment process. However,the Board remains committed to appointing the most appropriatecandidate, regardless of gender or other forms of diversity.Therefore, no targets have been set against which to report.

The Committee conducts an annual performance evaluation of theBoard, its committees and individual Directors to ensure that allDirectors and the Chairman have devoted sufficient time andcontributed adequately to the work of the Board and itsCommittees. The evaluation of the Board considers the balance ofexperience, skills, independence, corporate knowledge, its diversity,including gender, and how it works together. This year onlinequestionnaires, developed by a firm of independent consultantsLintstock Limited, were completed by Robert Jeens, AlexanderEaston and George Nianias and the Chairman. The evaluation ofthose Directors was led by the Chairman of the NominationCommittee who also met individually with each of those Directors.As the Chairman is also the Chairman of the Nomination Committee,the Evaluation and Performance of the Chairman is reviewedseparately by the other non-executive directors. The Committee alsoreviewed Directors’ fees and made recommendations to the Boardas required.

The Committee has procedures in place to deal with potentialconflicts of interest and confirms that there were no actual orindirect interests of a Director which conflicted with the interests ofthe Company during the year.




27

Audit Committee The Audit Committee, chaired by Robert Jeens, consists of all theDirectors, bar the Chairman of the Board, and meets at least twiceeach year. The Chairman of the Board attends all Meetings byinvitation of the Committee. The members of the Audit Committeeconsider that they have recent and relevant financial expertise andthe requisite skills and experience to fulfil the responsibilities of theCommittee. Ongoing evaluation is undertaken as detailed previouslyin order to identify any performance issues.

The Committee reviews the actions and judgements of the Managerin relation to the half year and annual accounts and the Company’scompliance with the UK Corporate Governance Code. At the requestof the Board, the Audit Committee provides confirmation to theBoard as to how it has discharged its responsibilities so that theBoard may ensure that information presented to it is fair, balancedand understandable, together with details of how it has done so.

During its review of the Company’s financial statements for the yearended 31st October 2016, the Audit Committee considered thefollowing significant issues, in particular those communicated by theAuditors during their reporting:

Significant issue How the issue was addressed

The valuation of investments is undertaken inaccordance with the accounting policies, disclosed ininvestments note 1 to the accounts on page 43. Theaudit includes the determination of the valuation,existence and ownership of the investments.Controls are in place to ensure valuations areappropriate and existence is verified throughcustodian reconciliations. The Board monitors thecontrols in place.

The ability of the Board to control external politicalevents such as the current sanctions regime and thethreat of capital controls is limited. However, theBoard together with the Manager monitors thesanctions regime closely to ensure that theCompany’s business operates within itsrequirements. In addition the Board monitors thepolitical situation and its impact on the portfolio atfrequent intervals and whenever a major eventarises. Together with the input from the InvestmentManager, efforts are made to manage exposure tocertain sectors deemed to be more susceptible topolitical influences.

Market risk The ability of the Board to control external marketevents such as the large valuations in the price of oiland value of the Ruble is limited. Portfolio selectionis managed in light of the current volatility.

Significant issue How the issue was addressed

The recognition of investment income is undertakenin accordance with accounting policy note 1(c) to theaccounts on page 43. The Board regularly reviewssubjective elements of income and agrees theiraccounting treatment.

The Management fee is calculated in accordancewith the Investment Management Agreement. TheBoard monitor the level of the fee periodically.

Approval for the Company as an investment trustunder Sections 1158 and 1159 has been obtained andongoing compliance with the eligibility criteria ismonitored on a regular basis by the Manager onbehalf of the Board.

The Board was made fully aware of any significant financialreporting issues and judgements made in connection with thepreparation of the financial statements.

Having taken all available information into consideration and havingdiscussed the content of the annual report and accounts with theAlternative Investment Fund Manager (JPMF), Investment Managers,Company Secretary and other third party service providers, theAudit Committee has concluded that the Annual Report for the yearended 31st October 2016, taken as a whole, is fair, balanced andunderstandable and provides the information necessary forshareholders to assess the Company’s performance, business modeland strategy, and has reported on these findings to the Board. TheBoard’s conclusions in this respect are set out in the Statement ofDirectors’ Responsibilities on page 33.

The Board was made fully aware of any significant financialreporting issues and judgements made in connection with thepreparation of the financial statements. The Audit Committeereviews the terms of the Management Agreement and examines theeffectiveness of the Company’s internal control systems, receivesinformation from the Manager’s compliance department (seepage 28 Risk Management and Internal Controls) and also reviewsthe scope and results of the external audit, its cost effectiveness andthe independence and objectivity of the external auditors. In theDirectors’ opinion the Auditors are independent.

The Audit Committee also has a primary responsibility for makingrecommendations to the Board on the reappointment and removalof external auditors. Representatives of the Company’s Auditorsattended the Audit Committee meeting at which the draft AnnualReport & Accounts were considered and also engage with Directorsas and when required. The current audit firm has audited theCompany’s financial statements since the formation of the Companyand were retained following a tender for audit services inSeptember 2015. The Company’s year ended 31st October 2016 is

Valuation, existenceand ownership ofinvestments

Political Risksincluding currentsanctions andpossible capitalcontrols

Recognition ofinvestment income

Calculation ofManagement Fee

Compliance withSections 1158 and 1159



the first of a three year maximum term that the current auditpartner Sarah Williams has been in the role for the Company.See note 6 on page 46 for details of the auditor’s fees.

Terms of ReferenceBoth the Nomination Committee and the Audit Committee havewritten terms of reference which define clearly their respectiveresponsibilities, copies of which are available for inspection onrequest at the Company’s registered office, on the Company’swebsite and at the Annual General Meeting.

Relations with Shareholders The Board regularly monitors the shareholder profile of theCompany. It aims to provide shareholders with a full understandingof the Company’s activities and performance and reports formally toshareholders twice each year by way of the annual report andaccounts, and half year report. This is supplemented by the dailypublication, through the London Stock Exchange, of the net assetvalue of the Company’s shares.

The Company’s broker, investment managers and the Manager haveregular discussions with larger shareholders. The Chairman andDirectors make themselves available as and when required toaddress shareholder queries. The Directors may be contactedthrough the Company Secretary whose details are shown onpage 67. The Chairman can also be contacted via the Company’swebsite by following the ‘Ask a Question’ link atwww.jpmrussian.co.uk.

All shareholders are encouraged to attend the Company’s AnnualGeneral Meeting at which the Directors and representatives of theManager are available in person to meet shareholders and answertheir questions. In addition, a presentation is given by theinvestment manager who reviews the Company’s performance.

The Company’s Annual Report and Accounts is published in time togive shareholders at least 20 working days’ notice of the AnnualGeneral Meeting. Shareholders wishing to raise questions inadvance of the meeting are encouraged to write to the CompanySecretary at the address shown on page 67.

Details of the proxy voting on each resolution will be published onthe Company website shortly after the Annual General Meeting.

Section 992 Companies Act 2006The following disclosures are made in accordance with Section 992Companies Act 2006.

Capital StructureThe Company’s capital structure is summarised on the inside frontcover of this report.

Voting Rights in the Company’s sharesDetails of the voting rights in the Company’s shares as at the date ofthis report are given in note 16 to the Notice of Annual GeneralMeeting on page 62.

Notifiable Interests in the Company’s Voting RightsAt the year end the following had declared a notifiable interest inthe Company’s voting rights:

Number of Shareholders voting rights %

City of London Investment Management Company Limited 15,259,286 29.20

Lazard Asset Management LLC 10,874,772 20.78JPMorgan Asset Management

(UK) Limited1 3,236,878 6.18Legal and General Investment

Management 1,621,914 3.011 Held on behalf of JPMAM Investment Account and ISA participants.

Risk Management and Internal Controls The UK Corporate Governance Code requires the Directors, at leastannually, to review the effectiveness of the Company’s system ofinternal control and to report to shareholders that they have doneso. This encompasses a review of all controls, which the Board hasidentified as including business, financial, operational, complianceand risk management.

The Directors are responsible for the Company’s system of internalcontrol which is designed to safeguard the Company’s assets,maintain proper accounting records and ensure that financialinformation used within the business, or published, is reliable.However, such a system can only be designed to manage ratherthan eliminate the risk of failure to achieve business objectives andtherefore can only provide reasonable, but not absolute, assuranceagainst fraud, material mis-statement or loss.

Since investment management, custody of assets and alladministrative services are provided to the Company by theManager and its associates, the Company’s system of internalcontrol mainly comprises monitoring the services provided by theManager and its associates, including the operating controlsestablished by them, to ensure they meet the Company’s businessobjectives. There is an ongoing process for identifying, evaluatingand managing the significant risks faced by the Company. Seepage 18 Principal Risks. This process has been in place for the yearunder review and up to the date of the approval of the AnnualReport and Accounts, and it accords with the Turnbull guidance.In common with most investment trusts the Company does not havean internal audit function of its own but seeks assurance from theaudit department of the Manager. The audit department has agreed




29

to provide the Audit Committee with a periodic oral report onrelevant matters. The key elements designed to provide effectiveinternal control are as follows:

Financial Reporting – Regular and comprehensive review by theBoard of key investment and financial data, including managementaccounts, revenue projections, analysis of transactions andperformance comparisons.

Management Agreement – Appointment of a manager, depositaryand custodian regulated by the Financial Conduct Authority (FCA),whose responsibilities are clearly defined in a written agreement.

Manager’s Systems – The Manager’s system of internal controlincludes organisational agreements which clearly define the lines ofresponsibility, delegated authority, control procedures and systems.These are monitored by the Manager’s compliance departmentwhich regularly monitors compliance with FCA rules and reports tothe Board.

Investment Strategy – Authorisation and monitoring of theCompany’s investment strategy and exposure limits by the Board.

The Board, either directly or through the Audit Committee, keepsunder review the effectiveness of the Company’s system of internalcontrol by monitoring the operation of the key operating controls ofthe Manager and its associates as follows:

• Reviews the terms of the management agreement and receivesregular reports from the Manager’s compliance department;

• Reviews the reports on the risk management and internal controlsand the operations of its Depositary BNY Mellon Trust &Depositary (UK) Limited and its custodian JPMorgan Chase Bank,which are themselves independently reviewed; and

• Reviews every six months an independent report on the internalcontrols and the operations of The Manager.

By means of the procedures set out above, the Board confirms thatit has reviewed the effectiveness of the Company’s system ofinternal control for the year ended 31st October 2016, and to thedate of approval of this Annual Report and Accounts. Moreover, thecontrols accord with the Financial Reporting Council, Guidance onRisk Management, internal control and related Financial andBusiness Reporting.

During the course of its reviews of the system of internal control,the Board has not identified, nor been advised of any failings orweaknesses which it has determined to be significant.

Greenhouse Gas EmissionsThe Company is managed by JPMF with Portfolio Managementdelegated to JPMAM. It has no employees and all of its Directors arenon-executive, the day to day activities being carried out by thirdparties. There are therefore no disclosures to be made in respect ofemployees. The Company has no premises, consumes no electricity,gas or diesel fuel and consequently does not have a measurable

carbon footprint. JPMAM is also a signatory to Carbon DisclosureProject. JPMorgan Chase is a signatory to the Equator Principles onmanaging social and environmental risk in project finance.

Corporate Governance and Voting Policy The Company delegates responsibility for voting to the Manager.The following is a summary of JPMorgan Asset Management (UK)Limited (‘JPMAM’) policy statements on corporate governance,voting policy and social and environmental issues, which has beenreviewed and noted by the Board.

Corporate Governance JPMAM believes that corporate governance is integral to ourinvestment process. As part of our commitment to delivering superiorinvestment performance to our clients, we expect and encourage thecompanies in which we invest to demonstrate the highest standards ofcorporate governance and best business practice. We examine theshare structure and voting structure of the companies in which weinvest, as well as the board balance, oversight functions andremuneration policy. These analyses then form the basis of our proxyvoting and engagement activity.

Proxy Voting JPMAM manages the voting rights of the shares entrusted to it as itwould manage any other asset. It is the policy of JPMAM to vote in aprudent and diligent manner, based exclusively on our reasonablejudgement of what will best serve the financial interests of our clients.So far as is practicable, we will vote at all of the meetings called bycompanies in which we are invested.

Stewardship/EngagementJPMAM recognises its wider stewardship responsibilities to its clientsas a major asset owner.

JPMAM endorses and complies with the FRC Stewardship Code for itsUK investments and supports the principles as best practice elsewhere.We believe that regular contact with the companies in which we investis central to our investment process and we also recognise theimportance of being an ‘active’ owner on behalf of our clients.

JPMAM’s Voting Policy and Corporate Governance Guidelines areavailable on request from the Company Secretary or can bedownloaded from JPMAM’s website:http://www.jpmorganinvestmenttrusts.co.uk/Governance. This alsosets out its approach to the seven principles of the FRC StewardshipCode, its policy relating to conflicts of interest and its detailed votingrecord.

By order of the Board Paul Winship, ACIS for and on behalf of JPMorgan Funds Limited, Secretary

20th January 2017




The Board has prepared this Report in accordance with therequirements of Section 421 of the Companies Act 2006 asamended.

Directors’ Remuneration PolicyThe Directors’ Remuneration Policy is subject to a triennial bindingvote. The shareholders approved the resolution in favour of theCompany’s Directors’ Remuneration Policy at the 2015 AGM.Therefore an ordinary resolution to approve this report will be putto shareholders at the 2018 Annual General Meeting. The policy, isset out in full below and is currently in force.

At the Annual General Meeting held on 5th March 2015, of votescast, 99.86% of votes cast were in favour of (or granted discretionto the Chairman who voted in favour of) the remuneration policyand 0.14% voted against.

Details of voting on the Directors’ Remuneration Policy will beprovided in the Company’s annual report triennially.

The Board’s policy for this and subsequent years is that Directors’fees should properly reflect the time spent by the Directors on theCompany’s business and should be at a level to ensure thatcandidates of a high calibre are recruited to the Board. TheChairman of the Board and the Chairman of the Audit Committeeare paid higher fees than other Directors, reflecting the greater timecommitment involved in fulfilling those roles.

The Nomination Committee, comprising all Directors, reviews feeson a regular basis and makes recommendations to the Board as andwhen appropriate. Reviews are based on market data provided bythe Manager, and includes research carried out by Trust Associateson the level of fees paid to the directors of the Company’s peers andwithin the investment trust industry generally.

All of the Directors are non-executive. There are no performance-related elements to their fees and the Company does not operateany type of incentive, share scheme, award or pension scheme andtherefore no Directors receive bonus payments or pensioncontributions from the Company or hold options to acquire shares inthe Company. Directors are not granted exit payments and are notprovided with compensation for loss of office. No other paymentsare made to Directors, other than the reimbursement of reasonableout-of-pocket expenses.

The Company’s Articles of Association stipulate that aggregate feesmust not exceed £200,000 per annum. Any increase in this themaximum aggregate amount requires both Board and shareholderapproval.

The Company has no Chief Executive Officer and no employees andtherefore there was no consultation with employees, and there is no

employee comparative data to provide, in relation to the setting ofthe remuneration policy for Directors.

The Company has not sought shareholder views on its remunerationpolicy. The Nomination Committee considers any commentsreceived from shareholders on remuneration policy on an ongoingbasis and will take account of these views if appropriate.

The Directors do not have service contracts with the Company. Theterms and conditions of Directors’ appointments are set out informal letters of appointment which are available for review at theCompany’s Annual General Meeting and the Company’s registeredoffice. Details of the Board’s policy on tenure are set out on page 25.

Directors Remuneration Policy ImplementationThe Directors’ Remuneration Report is subject to an annual advisoryvote and therefore an ordinary resolution to approve this report willbe put to shareholders at the forthcoming Annual General Meeting.There have been no changes to the policy compared with the yearended 31st October 2015 and no changes are proposed for the yearending 31st October 2017.

At the Annual General Meeting held on 3rd March 2016, of votescast, 99.90% of votes cast were in favour of (or granted discretionto the Chairman who voted in favour of) the remuneration reportand 0.10% voted against.

Details of voting on the Remuneration Policy Implementation Reportfrom the 2017 Annual General Meeting will be given in the annualreport for the year ending 31st October 2017, and annuallythereafter.

The law requires the Company’s Auditors to audit certain of thedisclosures provided. Where disclosures have been audited, they areindicated as such. The Auditors’ opinion is included in theIndependent Auditors’ Report on pages 34 to 39.

Details of the implementation of the Company’s remuneration policyare given below. No advice from remuneration consultants wasreceived during the year under review.

Single total figure of remunerationThe single total figure of remuneration for the Board as a whole forthe year ended 31st October 2016 was £121,564. The single totalfigure of remuneration for each Director is detailed below togetherwith the prior year comparative.

There are no performance targets in place for the Directors of theCompany and there are no benefits for any of the Directors whichwill vest in the future. There are no benefits, pension, bonus, longterm incentive plans, exit payments or arrangements in place onwhich to report.

DIRECTORS’ REMUNERATION REPORT


31

Single total figure table1

Total feesDirectors’ Name 2016 2015

Gill Nott £35,000 £27,600Alexander Easton £23,000 £23,000Robert Jeens £27,000 £27,000George Nianias £23,000 £23,000 Lysander Tennant £7,814 £30,400 Tamara Sakovska £5,750 —

Total £121,564 £131,0001 Audited information.

During the year under review, Directors’ fees were paid at a fixedrate of £35,000 per annum for the Chairman, £27,000 per annumfor the Chairman of the Audit Committee and £23,000 per annumfor each other Director. The last increase to Directors’ fees wasmade on 1st November 2013. As referred to in the Chairman’sStatement on page 5, the directors fees were increased effectivefrom 1st November 2016 as follows: Board Chairman’s fee increasedby £2,500 (from £35,000 to £37,500), Audit Committee Chairman by£3,000 (from £27,000 to £30,000), Directors by £2,000 per annum(from £23,000 to £25,000).

Nil amounts (2015: nil) were paid to third parties for makingavailable the services of Directors.

Directors’ ShareholdingsThere are no requirements pursuant to the Company’s Articles ofAssociation for the Directors to own shares in the Company. TheDirectors’ beneficial shareholdings are detailed below. The Directorshave no other share interests or share options in the Company andno share schemes are available.

20161 2015Number of Number of

Directors’ Name shares held shares held

Gill Nott 3,000 3,000Alexander Easton 12,018 12,018Robert Jeens 15,000 15,000George Nianias nil nilLysander Tennant n/a 5,700Tamara Sakovska nil n/a

Total 30,018 35,7181 Audited information.

A graph showing the Company’s share price total return comparedwith the Company’s benchmark index, is set out below. Details of theCompany’s performance are set out on page 12.

Seven Year Share Price and Benchmark Total ReturnPerformance to 31st October 2016


Share price total return.

Benchmark. The Benchmark is the MSCI Russian 10/40 Equity Indices Index insterling terms.

A table showing the total remuneration for the role of Chairmanover the five years ended 31st October 2016 is below:

Remuneration for the role of Chairman over the fiveyears ended 31st October 2016

Performance related benefits received as a

Year ended percentage of 31st October Fees maximum payable

2016 £35,000 n/a2015 £35,000 n/a2014 £35,000 n/a2013 £31,000 n/a2012 £31,000 n/a

75

100

125

150

175

20162015201420132012201120102009




A table showing actual expenditure by the Company onremuneration and distributions to shareholders for the year and theprior year is as follows:

Expenditure by the Company on remuneration anddistributions to shareholders

Year ended31st October

2016 2015

Remuneration paid to all Directors £121,564 £131,000

Distribution to shareholders— by way of share repurchases £nil £560,000— by way of dividend £12,037,0001 £6,804,000

Total distribution to shareholders £12,037,000 £7,364,000

1 See note 8(a) on page 48 for further details.

For and on behalf of the Board Gill NottChairman

20th January 2017

DIRECTORS’ REMUNERATION REPORT CONTINUED


33

The Directors are responsible for preparing the annual report andfinancial statements, and the Directors’ Remuneration Report inaccordance with applicable law and regulations.

Company law requires the Directors to prepare financial statementsfor each financial year. Under that law, the Directors have preparedthe financial statements in accordance with United KingdomGenerally Accepted Accounting Practice (United KingdomAccounting Standards and applicable law) and Financial ReportingStandard (FRS) 102. Under company law the Directors must notapprove the financial statements unless they are satisfied that,taken as a whole, the annual report and accounts provide theinformation necessary for shareholders to assess the Company’sperformance, business model and strategy and that they give a trueand fair view of the state of affairs of the Company and of the totalreturn or loss of the Company for that period. In addition, to providethese confirmations, and in preparing these financial statements,the Directors must be satisfied that, taken as a whole, the annualreport and accounts are fair, balanced and understandable. In orderto provide these confirmations and in preparing these annualstatements the Directors are required to:

• select suitable accounting policies and then apply themconsistently;

• make judgements and accounting estimates that are reasonableand prudent;

• state whether applicable UK Accounting Standards have beenfollowed, subject to any material departures disclosed andexplained in the financial statements; and

• prepare the financial statements on the going concern basisunless it is inappropriate to presume that the Company willcontinue in business

and the Directors confirm they have done so.

The Directors are responsible for keeping proper accounting recordsthat are sufficient to show and explain the Company’s transactionsand disclose with reasonable accuracy at any time the financialposition of the Company and enable them to ensure that thefinancial statements comply with the Companies Act 2006. They arealso responsible for safeguarding the assets of the Company andhence for taking reasonable steps for the prevention and detectionof fraud and other irregularities.

Under applicable law and regulations the Directors are alsoresponsible for preparing a Strategic Report, a Directors’ Report,Directors’ Remuneration Report and Statement of CorporateGovernance that comply with that law and those regulations.

Each of the Directors, whose names and functions are listed in theDirectors’ Report, confirms that, to the best of their knowledge:

• the financial statements, which have been prepared in accordancewith United Kingdom Generally Accepted Accounting Practice(United Kingdom Accounting Standards) and applicable law, givea true and fair view of the assets, liabilities, financial position andreturn or loss of the Company; and

• The Directors confirm that, taken as a whole, the annual reportand accounts are fair, balanced and understandable and providethe information necessary for shareholders to assess the strategyand business model of the Company.

• That the Strategic Report and Directors Report include a fairreview of the development and performance of the business andthe position of the Company together with a description of theprincipal risks and uncertainties that the Company faces.

The Board confirms it is satisfied that the annual report andaccounts taken as a whole are fair, balanced and understandableand provide the information necessary for shareholders to assessthe performance, business model and strategy of the Company.

The accounts are published on the www.jpmrussian.co.uk websitewhich is maintained by the Company’s Manager. The maintenanceand integrity of the website maintained by the Manager is, so far asit relates to the Company, the responsibility of the Manager. Thework carried out by the Auditors does not involve consideration ofthe maintenance and integrity of this website and, accordingly, theAuditors accept no responsibility for any changes that haveoccurred to the financial statements since they were initiallypresented on the website. The financial statements are prepared inaccordance with UK legislation, which may differ from legislation inother jurisdictions.

For and on behalf of the Board Gill NottChairman

20th January 2017

STATEMENT OF DIRECTORS’ RESPONSIBILITIES



Independent Auditor’s Report

TO THE MEMBERS OF JPMORGAN RUSSIAN SECURITIES PLC

Our opinion on the financial statementsIn our opinion:• the financial statements give a true and fair view of the state of the Company’s affairs as at 31st October 2016 and of the Company’s netreturn for the year then ended;

• the financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and

• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.

What we have auditedJPMorgan Russian Securities plc’s financial statements comprise:

• Statement of Comprehensive Income for the year ended 31st October 2016

• Statement of Changes in Equity for the year ended 31st October 2016

• Statement of Financial Position as at 31st October 2016

• Related notes 1 to 21 to the financial statements

The financial reporting framework that has been applied in the preparation of the Company financial statements is applicable law andUnited Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including FRS 102 ‘The FinancialReporting Standard applicable in the UK and Republic of Ireland’.

Overview of our audit approach

• Incomplete or inaccurate income recognition through failure to recognise proper income entitlements or applyappropriate accounting treatment.

• Incorrect valuation and existence of the investment portfolio.

• Impact of Russian economic sanctions.

Audit scope • All audit work was performed directly by the audit engagement team.

Materiality • Materiality of £2.8 million which represents 1% of total equity shareholders’ funds (2015: £1.9 million).

Our assessment of risk of material misstatementWe identified the risks of material misstatement described below as those with the greatest effect on our overall audit strategy, theallocation of resources in the audit and the direction of the efforts of the audit team.

In addressing these risks, we have performed the procedures below which were designed in the context of the financial statements as awhole and, consequently, we do not express any opinion on these individual areas.

Risks of materialmisstatement


35

What we concluded to the Risk Our response to the risk Audit Committee

Incomplete or inaccurate incomerecognition through failure torecognise proper income entitlementsor apply appropriate accountingtreatment (as described on page 27 in theAudit Committee Report).

The investment income receivable by theCompany during the period directly affectsthe Company’s ability to pay a dividend toshareholders.

The Company’s income is received in theform of dividends from equities anddepositary receipts and interest fromliquidity funds, being £11.1 million(2015: £13.6 million) for the year.

In the Russian market, there can be a delaybetween declaration of the dividend andthe final payment date and therecoverability of accrued dividends can beuncertain.

As at 31st October 2016, the Company had£0.2 million (2015: £0.5 million) of accruedincome awaiting payment.

The Company received no special dividendsduring the year.

We agreed a sample of dividends to thecorresponding announcement made by theinvestee company.

We agreed, for a sample of investeecompanies, the dividend declarations madeby the investee company from anindependent source to the incomeentitlements recorded by the Company.

We agreed all accrued dividends to thirdparty source and to post year end bankstatements to assess the recoverability ofthese amounts.

We have checked that the Company’saccounting policies in respect of revenuerecognition have been applied as statedthroughout the year and are in line withFRS 102 and the AIC SORP.

We noted no issues in agreeing the sampleof dividend receipts to the correspondingannouncement made by the investeecompany.

We noted no issues in agreeing the sampleof dividend declarations to the incomeentitlements recorded by the Company.

We noted no issues in agreeing the accrueddividend receipts to an independent sourceand to the bank statements.

Incorrect valuation and existence ofthe investment portfolio (as describedon page 27 in the Audit Committee Report).

The Company’s investment portfolioconsists of listed equities and depositaryreceipts with a total valuation of£279.9 million as at 31st October 2016(2015: £195.3 million).

The valuation of the assets held in theinvestment portfolio is the key driver of theCompany’s net asset value and total return.Incorrect asset pricing or a failure tomaintain proper legal title of the assetsheld by the Company could have asignificant impact on the portfolio valuationand the return generated for shareholders.

For all investments in the portfolio, weagreed the prices and exchange ratesapplied to an independent source.

We have independently obtainedconfirmations from the Company’sCustodian and Depositary to confirm theexistence of the assets held as at31st October 2016.

For all investments, we noted no materialdifferences in market value or exchangerates used.

We noted no differences between theCustodian and Depositary confirmationsand the Company’s underlying financialrecords.


Independent Auditor’s Report continued


What we concluded to the Risk Our response to the risk Audit Committee

In the current year, we recognise a risk of material misstatement in relation to the recognition of revenue. We have assessed this as asignificant risk in the current year, as investment income receivable by the Company during the period directly affects the Company’s abilityto pay a dividend to shareholders and judgement is used in allocating special dividends between revenue and capital. In addition, wecontinue to recognise a risk of material misstatement in relation to valuation and existence of the investment portfolio as well as the impactof the Russian economic sanctions. We have removed the risk in relation to the management fee. The management fees are determined bya straightforward calculation and we can verify the inputs to supporting documentation. There are also no history of errors in thesecalculations.

The scope of our auditOur assessment of audit risk, our evaluation of materiality and our allocation of performance materiality determine our audit scope for theCompany. This enables us to form an opinion on the financial statements. We take into account size, risk profile, the organisation of theCompany and effectiveness of controls and changes in the business environment when assessing the level of work to be performed. All auditwork was performed directly by the audit engagement team.

Our application of materialityWe apply the concept of materiality in planning and performing the audit, in evaluating the effect of identified misstatements on the auditand in forming our audit opinion.

MaterialityThe magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably be expected to influence the economicdecisions of the users of the financial statements. Materiality provides a basis for determining the nature and extent of our audit procedures.

We determined planning materiality for the Company to be £2.8 million (2015: £1.9 million) which is 1% of equity shareholders’ funds.We derived our materiality calculation from a proportion of total equity shareholders’ funds as we consider that to be the key measurementof the Company’s performance.

Failure to adequately assess thepotential impact on the Company ofthe continued economic sanctions inRussia (as described on page 27 in theAudit Committee Report).

The impact of the sanctions on thevaluation of the investment portfolio shouldbe appropriately considered.

We reviewed and assessed the system ofinternal control used by the Company andthe Manager to monitor compliance withthe sanctions regime.

We reviewed the stocks in the portfolio forevidence that they may be subject to theUK Government and US Treasury’sSanctions placed on the Russian market.

We have considered the liquidity of theinvestment portfolio at the year–end dateto ensure active trading.

We deem the system of internal control tobe adequate with regards to monitoringcompliance with the sanctions regime.

None of the stocks in the investmentportfolio at 31st October 2016 appear onthe sanctions list.

We noted no issues with the liquidity of theinvestment portfolio at the year end.


37

Performance materialityThe application of materiality at the individual account or balance level. It is set at an amount to reduce to an appropriately low level theprobability that the aggregate of uncorrected and undetected misstatements exceeds materiality.

On the basis of our risk assessments, together with our assessment of the Company’s overall control environment, our judgment was thatoverall performance materiality (i.e. our tolerance for misstatement in an individual account or balance) for the Company should be 75% ofplanning materiality, being £2.1 million (2015: £1.4 million). Our objective in adopting this approach was to ensure that total undetected anduncorrected audit

differences in all accounts did not exceed our planning materiality level. We have set performance materiality at this percentage due to ourpast experience of the audit that indicates a lower risk of misstatements, both corrected and uncorrected.

Given the importance of the distinction between revenue and capital for the Company we also applied a separate testing threshold of£0.5 million (2015: £0.6 million) for the revenue column of the Income Statement, being 5% of the revenue return on ordinary activitiesbefore taxation.

Reporting thresholdAn amount below which identified misstatements are considered to be clearly trivial.

We agreed with the audit committee that we would report all audit differences in excess of £0.1 million (2015: £0.1 million) as well asdifferences below that threshold that, in our view, warranted reporting on qualitative grounds.

We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above and in the light of otherrelevant qualitative considerations.

Scope of the audit of the financial statementsAn audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurancethat the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of:whether the accounting policies are appropriate to the Company’s circumstances and have been consistently applied and adequatelydisclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financialstatements. In addition, we read all the financial and non-financial information in the Annual Report to identify material inconsistencies withthe audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistentwith, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements orinconsistencies we consider the implications for our report.

Respective responsibilities of directors and auditorAs explained more fully in the Statement of Directors’ Responsibilities set out on page 33 the directors are responsible for the preparationof the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion onthe financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standardsrequire us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Ouraudit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in anauditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone otherthan the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.



Independent Auditor’s Report continued

Opinion on other matters prescribed by the Companies Act 2006In our opinion:

• the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006;and

• the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements areprepared is consistent with the financial statements.

Matters on which we are required to report by exception

ISAs (UK and Ireland) reportingWe are required to report to you if, in our opinion, financial and non-financial information in the annual report is:

• materially inconsistent with the information in the audited financial statements; or

• apparently materially incorrect based on, or materially inconsistent with, our knowledge of the Company acquired in thecourse of performing our audit; or

• otherwise misleading.

In particular, we are required to report whether we have identified any inconsistencies between our knowledgeacquired in the course of performing the audit and the directors’ statement that they consider the annual reportand accounts taken as a whole is fair, balanced and understandable and provides the information necessary forshareholders to assess the entity’s performance, business model and strategy; and whether the annual reportappropriately addresses those matters that we communicated to the audit committee that we consider should havebeen disclosed.

Companies Act 2006 reportingWe are required to report to you if, in our opinion:

• adequate accounting records have not been kept by the Company, or returns adequate for our audit have not beenreceived from branches not visited by us; or

• the Company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the accounting records and returns; or

• certain disclosures of directors’ remuneration specified by law are not made; or

• we have not received all the information and explanations we require for our audit.

Listing Rules review requirementsWe are required to review:

• the directors’ statement in relation to going concern set out on page 23, and longer-term viability, set out on page 20; and

• the part of the Corporate Governance Statement relating to the Company’s compliance with the provisions of the UK Corporate Governance Code specified for our review.

We have noexceptions toreport.




39

Statement on the Directors’ Assessment of the Principal Risks that Would Threaten the Solvency or Liquidityof the Entity

ISAs (UK and Ireland) reportingWe are required to give a statement as to whether we have anything material to add or to draw attention to inrelation to:

• the directors’ confirmation in the annual report that they have carried out a robust assessment of the principal risks facing the entity, including those that would threaten its business model, future performance, solvency or liquidity;

• the disclosures in the annual report that describe those risks and explain how they are being managed ormitigated;

• the directors’ statement in the financial statements about whether they considered it appropriate to adopt thegoing concern basis of accounting in preparing them, and their identification of any material uncertainties to theentity’s ability to continue to do so over a period of at least twelve months from the date of approval of thefinancial statements; and

• the directors’ explanation in the annual report as to how they have assessed the prospects of the entity, overwhat period they have done so and why they consider that period to be appropriate, and their statement as towhether they have a reasonable expectation that the entity will be able to continue in operation and meet itsliabilities as they fall due over the period of their assessment, including any related disclosures drawing attentionto any necessary qualifications or assumptions.

Sarah Williams (Senior Statutory Auditor)for and on behalf of Ernst & Young LLP, Statutory Auditor, London

20th January 2017

We havenothingmaterial toadd or todrawattention to.



2016 2015Revenue Capital Total Revenue Capital Total

Notes £’000 £’000 £’000 £’000 £’000 £’000

Gains/(losses) on investments held at fair value through profit or loss 3 — 94,420 94,420 — (43,673) (43,673)

Net foreign currency gains — 1,166 1,166 — 254 254Income from investments 4 11,087 — 11,087 13,590 — 13,590Interest receivable 4 22 — 22 8 — 8

Gross return/(loss) 11,109 95,586 106,695 13,598 (43,419) (29,821)Management fee 5 (435) (1,739) (2,174) (397) (1,587) (1,984)Other administrative expenses 6 (913) — (913) (840) — (840)

Net return/(loss) on ordinary activities before taxation 9,761 93,847 103,608 12,361 (45,006) (32,645)

Taxation 7 (1,665) 348 (1,317) (2,093) 324 (1,769)

Net return/(loss) on ordinary activities after taxation 8,096 94,195 102,291 10,268 (44,682) (34,414)

Return/(loss) per share 9 15.47p 179.98p 195.45p 19.60p (85.31)p (65.71)p

All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued in theyear.

The ‘Total’ column of this statement is the profit and loss account of the Company and the ‘Revenue’ and ‘Capital’ columns representsupplementary information prepared under guidance issued by The Association of Investment Companies. Net return/(loss) on ordinaryactivities after taxation represents the profit/(loss) for the year and also Total Comprehensive Income.

The notes on page 43 to 58 form part of these financial statements.

Financial Statements

STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31ST OCTOBER 2016


41

Called up Capital share redemption Other Capital Revenue capital reserve reserve reserves1 reserve1 Total £’000 £’000 £’000 £’000 £’000 £’000

At 31st October 2014 526 75 47,764 181,024 7,029 236,418Repurchase and cancellation of the Company’s own shares (2) 2 (560) — — (560)Net (loss)/return on ordinary activities — — — (44,682) 10,268 (34,414)Dividends paid in the year — — — — (6,804) (6,804)

At 31st October 2015 524 77 47,204 136,342 10,493 194,640Net return on ordinary activities — — — 94,195 8,096 102,291Dividends paid in the year — — — — (12,037) (12,037)

At 31st October 2016 524 77 47,204 230,537 6,552 284,894

1 These reserves form the distributable reserves of the Company and may be used to fund distribution of profits to investors via dividend payments.

The notes on page 43 to 58 form part of these financial statements.

STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31ST OCTOBER 2016



2016 2015 Notes £’000 £’000

Fixed assets Investments held at fair value through profit or loss 10 279,865 191,910

Current assets 11Debtors 494 552Cash and cash equivalents1 5,150 4,330

5,644 4,882Current liabilitiesCreditors: amounts falling due within one year 12 (615) (2,152)

Net current assets 5,029 2,730

Total assets less current liabilities 284,894 194,640

Net assets 284,894 194,640

Capital and reserves Called up share capital 13 524 524Capital redemption reserve 14 77 77Other reserve 14 47,204 47,204Capital reserves 14 230,537 136,342Revenue reserve 14 6,552 10,493

Total shareholders’ funds 284,894 194,640

Net asset value per share 15 544.3p 371.9p

1 This line item combines the two lines of ‘Investment in liquidity fund held at fair value through profit or loss’ and ‘Cash and short term deposits’ in the financial statements for the year ended31st October 2015 into one. Under FRS 102, liquidity funds are considered cash equivalents as they are held for cash management purposes.

The financial statements on pages 40 to 58 were approved and authorised for issue by the Directors on 20th January 2017 and signed ontheir behalf by:

Chairman

The notes on pages 43 to 58 form an integral part of these financial statements.

Company registration number: 4567378.

STATEMENT OF FINANCIAL POSITION AT 31ST OCTOBER 2016

Financial Statements continued


43

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST OCTOBER 2016

1. Accounting policies (a) Basis of accounting

The financial statements are prepared in accordance with the Companies Act 2006, United Kingdom Generally Accepted AccountingPractice (‘UK GAAP’), including FRS 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland’ and with theStatement of Recommended Practice ‘Financial Statements of Investment Trust Companies and Venture Capital Trusts’ (the ‘SORP’)issued by the Association of Investment Companies in November 2014.

All of the Company’s operations are of a continuing nature.

The financial statements have been prepared on a going concern basis. The disclosures on going concern on page 23 of the Directors’Report form part of these financial statements.

(b) Transition to FRS 102

This set of financial statements, in accordance with the SORP includes changes arising from the adoption of FRS 102 which theCompany is required to comply with for the first time for the year ended 31st October 2016. The Company’s date of transition toFRS 102 was 1st November 2014.

No significant changes have arisen from the adoption of the new standard. Where changes have arisen, they are substantially inrelation to presentation, disclosure and non-quantifiable aspects. There has been no impact to financial position or financialperformance and comparative figures which required restating were in respect of presentation only.

The investment in liquidity fund has been presented as a cash and cash equivalent in the current year to better reflect the fact thatthe position is held as an alternative to cash. It was previously held as a non-current asset, and the comparative figures in the relevantprimary financial statements and notes have been similarly amended.

The Company has elected not to prepare a Statement of Cash Flows for the current year, applying the exemption fromFRS 102 Section 7.1A(c).

Early adoptionIn March 2016, the FRC published amendments to FRS 102 concerning the fair value hierarchy disclosures. These amendments areeffective for accounting periods beginning on or after 1st January 2017. The Company has elected to adopt these amendments early inthis set of financial statements. Full disclosure is given in note 18 on page 52.

(c) Valuation of investments

The Company has chosen to adopt Sections 11 and 12 of FRS 102 in respect of financial instruments.

The Company’s business is investing in financial assets with a view to profiting from their total return in the form of income andcapital growth. The portfolio of financial assets is managed and its performance evaluated on a fair value basis, in accordance witha documented investment strategy and information is provided internally on that basis to the Company’s Board of Directors.Accordingly, upon initial recognition the investments are designated by the Company as held at fair value through profit or loss. Theyare included initially at fair value which is taken to be their cost, excluding expenses incidental to purchase which are written off tocapital at the time of acquisition. Subsequently the investments are valued at fair value, which are quoted bid prices for investmentstraded in active markets. For investments which are not traded in active markets, unlisted and restricted investments, the Board takesinto account the latest traded prices, other observable market data and asset values based on the latest management accounts.

All purchases and sales are accounted for on a trade date basis.

(d) Accounting for reserves

Gains and losses on sales of investments including the related foreign exchange gains and losses, realised gains and losses on foreigncurrency, management fees allocated to capital and any other capital charges, are included in the Statement of ComprehensiveIncome and dealt with in capital reserves.

Increases and decreases in the valuation of investments held at the year end including the related foreign exchange gains and losses,are included in the Statement of Comprehensive Income and dealt with in capital reserves within ‘Investment holding gains andlosses’.



NOTES TO THE FINANCIAL STATEMENTS CONTINUED

44 JPMORGAN RUSSIAN SECURITIES PLC . ANNUAL REPORT & ACCOUNTS 2016

1. Accounting policies continued

(e) Income

Dividends receivable from equity shares are included in revenue on an ex-dividend basis except where, in the opinion of the Board,the dividend is capital in nature, in which case it is included in capital.

Overseas dividends are included gross of any withholding tax.

Special dividends are recognised on an ex-dividend basis and are treated as a capital item or revenue item depending on the facts andcircumstances of each dividend.

Where the Company has elected to receive scrip dividends in the form of additional shares rather than in cash, the amount of the cashdividend foregone is recognised in revenue. Any excess in the value of the shares received over the amount of the cash dividend isrecognised in capital.

Deposit interest receivable is taken to revenue on an accruals basis.

(f) Expenses

All expenses are accounted for on an accruals basis. Expenses are allocated wholly to the revenue with the following exceptions:

– the management fee is allocated 20% to revenue and 80% to capital in line with the Board’s expected long term split ofrevenue and capital return from the Company investment portfolio.

– expenses incidental to the purchase and sale of an investment are charged to capital. These expenses are commonly referred toas transaction costs and comprise brokerage commission and stamp duty. Details of transaction costs are given in note 10 onpage 49.

(g) Financial instruments

Cash and cash equivalents may comprise cash including demand deposits which are readily convertible to a known amount of cashand are subject to an insignificant risk of change in value. Liquidity funds are considered cash equivalents as they are held for cashmanagement purposes as an alternative to cash, are short term, and readily convertible to a known amount of cash.

Other debtors and creditors do not carry any interest, are short term in nature and are accordingly stated at nominal value, withdebtors reduced by appropriate allowances for estimated irrecoverable amounts.

(h) Taxation

Current tax is provided at the amounts expected to be paid or recovered.

Deferred tax is provided on all timing differences that have originated but not reversed by the balance sheet date. Deferred taxliabilities are recognised for all taxable timing differences but deferred tax assets are only recognised to the extent that it is morelikely than not that taxable profits will be available against which those timing differences can be utilised.

Deferred tax is measured at the tax rate which is expected to apply in the periods in which the timing differences are expected toreverse, based on tax rates that have been enacted or substantively enacted at the balance sheet date and is measured on anundiscounted basis.

(i) Value Added Tax (‘VAT’)

Expenses are disclosed inclusive of the related irrecoverable VAT. Recoverable VAT is calculated using the partial exemption methodbased on the proportion of zero rated supplies to total supplies.


45

(j) Foreign currency

The Company is required to identify its functional currency, being the currency of the primary economic environment in which theCompany operates. The Board, having regard to the currency of the Company’s share capital and the predominant currency in which itpays distributions and expenses and its shareholders operate, has determined that sterling is the functional currency. Sterling is alsothe currency in which the financial statements are presented.

Transactions denominated in foreign currencies are converted at actual exchange rates at the date of the transaction. Monetaryassets, liabilities and equity investments held at fair value, denominated in foreign currencies at the year end are translated at therates of exchange prevailing at the year end.

Any gain or loss arising from a change in exchange rates subsequent to the date of the transaction is included in the Statement ofComprehensive Income as an exchange gain or loss in revenue or capital, depending on whether the gain or loss is of a revenue orcapital nature.

(k) Dividends

Dividends are included in the financial statements in the year in which they are approved by shareholders.

(l) Repurchase of ordinary shares for cancellation

The cost of repurchasing ordinary shares including the related stamp duty and transactions costs is charged to the ‘Other reserve’ anddealt with in the Statement of Changes in Equity. Share repurchase transactions are accounted for on a trade date basis. The nominalvalue of ordinary share capital repurchased and cancelled is transferred out of ‘Called up share capital’ and into ‘Capital redemptionreserve’.

2. Significant accounting judgements, estimates and assumptionsThe preparation of the Company’s financial statements on occasion requires management to make judgements, estimates andassumptions that affect the reported amounts in the primary financial statements and the accompanying disclosures. Theseassumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets orliabilities affected in the current and future periods, depending on circumstance.

Management do not believe that any significant accounting judgements or estimates have been applied to this set of financialstatements, that have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities withinthe next financial year.

3. Gains/(losses) on investments held at fair value through profit or loss 2016 20151

£’000 £’000

Gains/(losses) on investments held at fair value through profit or loss based on historic cost 1,773 (52,719)Amounts recognised in investment holding gains and losses in respect of investments

sold during the year 10,128 32,312

Gains/(losses) on sales of investments based on the carrying value at the previous balance sheet date 11,901 (20,407)

Net movement in investment holding gains and losses 82,723 (23,211)Other capital charges (204) (55)

Total capital gains/(losses) on investments held at fair value through profit or loss 94,420 (43,673)

1 Relevant figures have been amended in line with the current presentation adopted. Under FRS 102, liquidity funds are classified as cash equivalents.





4. Income 2016 2015£’000 £’000

Income from investmentsUK dividends — 22Overseas dividends 11,087 13,568

11,087 13,590

Interest receivableInterest from liquidity fund 22 8

22 8

Total income 11,109 13,598

5. Management fee2016 2015

Revenue Capital Total Revenue Capital Total £’000 £’000 £’000 £’000 £’000 £’000

Management fee 435 1,739 2,174 397 1,587 1,984

Details of the management fee are given in the Directors’ Report on page 23.

6. Other administrative expenses2016 2015£’000 £’000

Dividend charges 299 277Administration expenses 219 167Safe custody fees 149 134Directors’ fees1 122 131Savings scheme costs2 54 65Depositary fees3 41 37Auditors’ remuneration for audit services4 29 29

Total 913 840

1 Full disclosure is given in the Directors’ Remuneration Report on pages 30 to 32.2 Paid to the Manager for marketing and administration of saving scheme products. Includes £5,000 (2015: £6,000) irrecoverable VAT.3 Includes £4,000 (2015: £4,000) irrecoverable VAT.4 No fees were payable to the auditors for non-audit services (2015: nil). Includes £3,000 (2015: £3,000) irrecoverable VAT.


47

7. Taxation (a) Analysis of tax charge in the year

2016 2015Revenue Capital Total Revenue Capital Total £’000 £’000 £’000 £’000 £’000 £’000

UK corporation tax 1,235 — 1,235 1,640 — 1,640Double taxation relief (924) — (924) (1,182) — (1,182)Deferred taxation liability 20 — 20 — — —Overseas withholding tax 1,085 — 1,085 1,311 — 1,311Tax relief on expenses charged to capital 348 (348) — 324 (324) —Prior year adjustment (99) — (99) — — —

Total tax charge for the year 1,665 (348) 1,317 2,093 (324) 1,769

(b) Factors affecting total tax charge for the year

The tax assessed for the year is lower (2015: higher) than the Company’s applicable rate of corporation tax for the year of 20% (2015:20.41%). The factors affecting the total tax charge for the year are as follows:

2016 2015Revenue Capital Total Revenue Capital Total £’000 £’000 £’000 £’000 £’000 £’000

Net return/(loss) on ordinary activities before taxation 9,761 93,847 103,608 12,361 (45,006) (32,645)

Net return/(loss) on ordinary activities beforetaxation multiplied by the Company’sapplicable rate of corporation tax of 20%(2015: 20.41%) 1,952 18,769 20,721 2,523 (9,186) (6,663)

Effects of:Non taxable capital (gains)/losses — (19,117) (19,117) — 8,862 8,862Non taxable UK dividends — — — (4) — (4)Non taxable overseas dividends (422) — (422) (284) — (284)Tax attributable to expenses and

finance costs charged to capital (348) 348 — (324) 324 —Tax relief on expenses charged to capital 348 (348) — 324 (324) —Income taxed in different periods — — — (72) — (72)Overseas withholding tax 1,085 — 1,085 1,311 — 1,311Double taxation relief (924) — (924) (1,182) — (1,182)Brought forward revenue losses utilised — — — (199) — (199)Double taxation relief on deferred tax (21) — (21) — — —Prior year adjustment (deferred tax not

recognised in prior year) 95 — 95 — — —Change in deferred tax rate (1) — (1) — — —Prior year adjustment (current tax) (99) — (99) — — —

Total tax charge for the year 1,665 (348) 1,317 2,093 (324) 1,769





7. Taxation continued

(c) Deferred taxation

The provision for deferred taxation has arisen from timing differences in respect of overseas dividends which have originated but notreversed by the balance sheet date. The movements on the deferred tax account are as follows:

2016Revenue Capital Total £’000 £’000 £’000

Opening balance — — —Deferred tax in respect of prior period 47 — 47Credited to revenue return (27) — (27)

Closing balance 20 — 20

8. Dividends1

(a) Dividends paid and proposed2016 2015£’000 £’000

Dividend paid2015 final dividend of 13.0p (2014: 13.0p) 6,804 6,8042015 special dividend of 4.0p (2014: nil) 2,093 —2016 interim dividend of 6.0p (2015: nil) 3,140 —

12,037 6,804

Dividend proposed2016 final ordinary dividend of 8.0p (2015: 13.0p) 4,187 6,8042016 special dividend of nil (2015: 4.0p) — 2,093

The dividend proposed in respect of the year ended 31st October 2016 is subject to shareholder approval at the forthcoming AnnualGeneral Meeting. In accordance with the accounting policy of the Company, this dividend will be reflected in the financial statementsfor the year ending 31st October 2017.

(b) Dividend for the purposes of Section 1158 of the Corporation Tax Act 2010 (‘Section 1158’)

The requirements of Section 1158 are considered on the basis of the dividend proposed in respect of the financial year, shown below.The revenue available for distribution by way of dividend is £8,096,000 (2015: £10,268,000).

2016 2015£’000 £’000

2016 interim dividend of 6.0p (2015: nil) 3,140 —2016 final ordinary dividend of 8.0p (2015: 13.0p) 4,187 6,8042016 special dividend of nil (2015: 4.0p) — 2,093

Total dividends for Section 1158 purposes 7,327 8,897

1 All dividends paid and proposed in the period are funded from the revenue reserve.

The revenue reserve after payment of the final dividend will amount to £2,365,000 (2015: £1,596,000).


49

9. Return/(loss) per share2016 2015£’000 £’000

Revenue return 8,096 10,268Capital return/(loss) 94,195 (44,682)

Total return/(loss) 102,291 (34,414)

Weighted average number of shares in issue during the year 52,337,112 52,379,071

Revenue return per share 15.47p 19.60pCapital return/(loss) per share 179.98p (85.31)p

Total return/(loss) per share 195.45p (65.71)p

10. Investments 2016 20151

£’000 £’000

Investments listed on a recognised stock exchange 279,865 191,910

Opening book cost 220,889 274,066Opening investment holding losses (28,979) (38,080)

Opening valuation 191,910 235,986

Movements in the year:Purchases at cost 97,942 106,841Sales – proceeds (104,611) (107,299)Gains/(losses) on sales of investments based on the carrying value at the previous balance

sheet date 11,901 (20,407)Net movement in investment holding gains and losses 82,723 (23,211)

279,865 191,910

Closing book cost 215,993 220,889Closing investment holdings gains/(losses) 63,872 (28,979)

Total investments held at fair value through profit or loss 279,865 191,910

1 Relevant figures have been amended in line with the current presentation adopted. Under FRS 102, liquidity funds are classified as cash equivalents.

Transaction costs on purchases during the year amounted to £326,000 (2015: £189,000) and on sales during the year amounted to£130,000 (2015: £122,000). These costs comprise mainly brokerage commission.

During the year, prior year investment holding losses amounting to £10,128,000 have been transferred to gains and losses on sales ofinvestments as disclosed in note 14.





11. Current assets2016 2015£’000 £’000

DebtorsSecurities sold awaiting settlement 280 —Dividends and interest receivable 177 510VAT recoverable 10 15Other debtors 27 27

Total 494 552

The Directors consider that the carrying amount of debtors approximates to their fair value. The Directors do not consider any of theamounts included in the note above to be past due or impaired as at 31st October 2016 (2015: £nil).

Cash and cash equivalents

Cash and cash equivalents comprise bank balances, short term deposits and liquidity funds. The carrying amount of these representstheir fair value. See note 17 for details.

12. Creditors: amounts falling due within one year 2016 2015£’000 £’000

Securities purchased awaiting settlement 364 1,599Corporation tax 100 458Deferred tax 20 —Other creditors and accruals 131 95

Total 615 2,152

The Directors consider that the carrying amount of creditors falling due within one year approximates to their fair value.

13. Called up share capital 2016 2015£’000 £’000

Issued and fully paid share capital:Ordinary shares of 1p eachOpening balance of 52,337,112 (2015: 52,532,112) shares 524 526Repurchase and cancellation of nil (2015: 195,000) shares — (2)

Closing balance of 52,337,112 (2015: 52,337,112) shares 524 524

The holders of ordinary shares carry the right to receive all the revenue profits of the Company available for distribution and fromtime to time determined by the Directors to be distributed by way of dividend. The holders of the ordinary shares hold all votingrights and are entitled to all the assets of the Company on a return of capital, return of assets or on a winding up.

Further details of transactions in the Company’s shares are given in the Business Review on page 16.


51

14. Capital and reserves Capital reserves2

Gains and InvestmentCapital losses on holding

Called up redemption Other sales of gains Revenueshare capital reserve reserve1 investments and losses reserve2 Total

£’000 £’000 £’000 £’000 £’000 £’000 £’000

Opening balance 524 77 47,204 165,332 (28,990) 10,493 194,640Transfer of prior period unrealised loss

on liquidity3 — — — (11) 11 — —Realised foreign currency gains on cash and

cash equivalents — — — 1,166 — — 1,166Realised gains on investments — — — 11,901 — — 11,901Unrealised gains on investments — — — — 82,723 — 82,723Transfer on disposal of investments — — — (10,128) 10,128 — —Expenses charged to capital — — — (1,739) — — (1,739)Other capital charges — — — (204) — — (204)Tax relief on expenses charged to capital 348 348Dividends paid in the year — — — — — (12,037) (12,037)Net revenue return for the year — — — — — 8,096 8,096

Closing balance 524 77 47,204 166,665 63,872 6,552 284,894

1 The ‘Other reserve’ was formerly share premium which was cancelled for the purpose of financing share buy-backs.2 These reserves form the distributable reserves of the Company and may be used to fund distribution of profits to investors via dividend payments.3 Transfer of opening liquidity fund unrealised loss between reserves as a result of the reclassification of liquidity holdings from investments to cash equivalent.

15. Net asset value per share2016 2015

Net assets (£’000) 284,894 194,640Number of shares in issue 52,337,112 52,337,112

Net asset value per share 544.3p 371.9p

16. Contingent liabilities and capital commitmentsAt the balance sheet date there were no contingent liabilities or capital commitments (2015: none).





17. Related party transactions Details of the management contract are set out in the Directors’ Report on page 23. The management fee payable to the Manager forthe year was £2,174,000 (2015: £1,984,000) of which £nil (2015: £nil) was outstanding at the year end.

During the year £54,000 (2015: £65,000), including VAT, was payable to the Manager for the marketing and administration of savingsscheme products, of which £nil (2015: £nil) was outstanding at the year end.

Included in note 6 on page 46 are safe custody fees amounting to £149,000 (2015: £134,000) payable to JPMorgan Chase Bank N.A. ofwhich £28,000 (2015: £21,000) was outstanding at the year end.

The Manager may carry out some of its dealing transactions through group subsidiaries. These transactions are carried out at arm’slength. The commission payable to JPMorgan Securities Limited for the year was £23,000 (2015: £13,000) of which £nil (2015: £nil) wasoutstanding at the year end.

The Company also holds cash in the JPMorgan US Dollar Liquidity Fund, which is managed by JPMorgan. At the year end this wasvalued at £4,732,000 (2015: £3,419,000). Interest amounting to £22,000 (2015: £3,000) was receivable during the year of which £nil(2015: £nil) was outstanding at the year end.

The Company also held cash in the JPM Sterling Liquidity Fund, which is managed by JPMorgan. At the year end this was £nil(2015: £nil). Interest amounting to £nil (2015: £5,000) was receivable during the year of which £nil (2015: £nil) was outstanding at theyear end.

Handling charges on dealing transactions amounting to £204,000 (2015: £55,000) were payable to JPMorgan Chase Bank N.A. duringthe year of which £1,000 (2015: £1,000) was outstanding at the year end.

At the year end, total cash of £418,000 (2015: £911,000) was held with JPMorgan Chase. A net amount of interest of £nil (2015: £nil)was receivable by the Company during the year from JPMorgan Chase.

Full details of Directors’ remuneration and shareholdings can be found on page 21 and in note 6 on page 46.

18. Disclosures regarding financial instruments measured at fair valueThe Company’s financial instruments within the scope of FRS 102 that are held at fair value comprise its investment portfolio.

The investments are categorised into a hierarchy consisting of the following three levels:

(1) The unadjusted quoted price in an active market for identical assets or liabilities that the entity can access at the measurementdate

(2) Inputs other than quoted prices included within Level 1 that are observable (i.e.: developed using market data) for the asset orliability, either directly or indirectly

(3) Inputs are unobservable (i.e.: for which market data is unavailable) for the asset or liability

Categorisation within the hierarchy has been determined on the basis of the lowest level input that is significant to the fair valuemeasurement of the relevant asset.

Details of the valuation techniques used by the Company are given in note 1(c) on page 43.

The following table sets out the fair value measurements using the FRS 102 hierarchy at 31st October.

2016 2015Assets Liabilities Assets Liabilities£’000 £’000 £’000 £’000

Level 1 279,865 — 191,910 —

Total 279,865 — 191,910 —

There were no transfers between Level 1, 2 or 3 during the year (2015: same).


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19. Financial instruments’ exposure to risk and risk management policies As an investment trust, the Company invests in equities for the long term so as to secure its investment objective stated on the‘Features’ page. In pursuing this objective, the Company is exposed to a variety of financial risks that could result in a reduction in theCompany’s net assets or a reduction in the profits available for dividends.

These financial risks include market risk (comprising currency risk, interest rate risk and other price risk), liquidity risk and credit risk.The Directors’ policy for managing these risks is set out below. The Company Secretary, in close cooperation with the Board and theManager, coordinates the Company’s risk management policy.

The objectives, policies and processes for managing the risks and the methods used to measure the risks that are set out below, havenot changed from those applying in the comparative year.

The Company’s classes of financial instruments are as follows:

— investments in Russian equity shares, preference shares, ADRs and GDRs, which are held in accordance with the Company’sinvestment objective;

— cash held within a liquidity fund; and

— short term debtors, creditors and cash arising directly from its operations;

(a) Market risk

The fair value or future cash flows of a financial instrument held by the Company may fluctuate because of changes in market prices.This market risk comprises three elements – currency risk, interest rate risk and other price risk. Information to enable an evaluationof the nature and extent of these three elements of market risk is given in parts (i) to (iii) of this note, together with sensitivityanalyses where appropriate. The Board reviews and agrees policies for managing these risks and these policies have remainedunchanged from those applying in the comparative year. The Manager assesses the exposure to market risk when making eachinvestment decision and monitors the overall level of market risk on the whole of the investment portfolio on an ongoing basis.

(i) Currency risk

Substantially all of the Company’s assets, liabilities and income are denominated in currencies other than sterling which is theCompany’s functional currency and presentation currency. As a result, movements in exchange rates may affect the sterlingvalue of those items.

Management of currency risk

The Manager monitors the Company’s exposure to foreign currencies on a daily basis and reports to the Board, which meets onat least four occasions each year. The Manager measures the risk to the Company of this exposure by considering the effect onthe Company’s net asset value and income of a movement in rates of exchange to which the Company’s assets, liabilities,income and expenses are exposed.

Foreign currency borrowing may be used to limit the Company’s exposure to changes in exchange rates which might otherwiseadversely affect the value of the portfolio of investments. This borrowing would be limited to currencies and amountscommensurate with the asset exposure to those currencies. Income denominated in foreign currencies is converted to sterlingon receipt.

Foreign currency exposure

The fair value of the Company’s monetary items that have foreign currency exposure at 31st October are shown below. Wherethe Company’s equity investments (which are not monetary items) are priced in a foreign currency, they have been includedseparately in the analysis so as to show the overall level of exposure.





19. Financial instruments’ exposure to risk and risk management policies continued

(a) Market risk continued(i) Currency risk continued

Foreign currency exposure continued

2016US$ Ruble HK$ EUR Total

£’000 £’000 £’000 £’000 £’000

Net current assets 5,157 — — 1 5,158

Foreign currency exposure on net monetary items 5,157 — — 1 5,158Investments held at fair value through profit or loss 271,902 — — — 271,902

Total net foreign currency exposure 277,059 — — 1 277,060

2015US$ Ruble HK$ EUR Total

£’000 £’000 £’000 £’000 £’000

Net current assets 3,122 69 — 1 3,192

Foreign currency exposure on net monetary items 3,122 69 — 1 3,192Investments held at fair value through profit or loss 186,891 — 2,470 — 189,361

Total net foreign currency exposure 190,013 69 2,470 1 192,553

In the opinion of the Directors, the above year end amounts are broadly representative of the exposure to foreign currency riskduring the year.

Equity investments held at fair value through profit or loss have all been included under their respective currency exposure inthe tables above, because they are priced in that currency. However it should be noted that the operating activities of thesecompanies are primarily exposed to the Ruble.

Foreign currency sensitivity

The following table illustrates the sensitivity of return after taxation for the year and net assets with regard to the Company’smonetary financial assets and financial liabilities and exchange rates. The sensitivity analysis is based on the Company’smonetary currency financial instruments held at each balance sheet date and the income receivable in foreign currency andassumes a 10% (2015: 10%) appreciation or depreciation in sterling against the currencies to which the Company is exposed to,which is considered to be a reasonable illustration based on the volatility of exchange rates during the year.

2016 2015If sterling If sterling If sterling If sterling

strengthens weakens strengthens weakensby 10% by 10% by 10% by 10%£’000 £’000 £’000 £’000

Statement of Comprehensive income – return after taxationRevenue return (1,111) 1,111 (1,357) 1,357Capital return (516) 516 (319) 319

Total return after taxation (1,627) 1,627 (1,676) 1,676

Net assets (1,627) 1,627 (1,676) 1,676

In the opinion of the Directors, the above sensitivity analysis is broadly representative of the whole year.

The foreign currency sensitivity of the equity investments is the same as the Other Price Risk sensitivity disclosed in note 19(a) (iii).


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(ii) Interest rate risk

Interest rate movements may affect the level of income receivable on cash deposits and the liquidity fund.

Management of interest rate risk

The Company does not normally hold significant cash balances. Short term borrowings may be used when required, howeverthe Company currently has no loan facility in place.

Interest rate exposure

The exposure of financial assets and liabilities to floating interest rates using the year end figures, giving cash flow interest raterisk when rates are reset, is shown below.

2016 2015£’000 £’000

Exposure to floating interest ratesJPMorgan US Dollar Liquidity Fund 4,732 3,419Cash and short term deposits 418 911

Total exposure 5,150 4,330

Interest receivable on cash balances, or paid on overdrafts, is at a margin below or above LIBOR respectively (2015: same). Thetarget interest earned on the JPMorgan US Dollar Liquidity Fund is the 7 day US Dollar London Interbank Bid Rate.

Interest rate sensitivity

The following table illustrates the sensitivity of the return after taxation for the year and net assets to a 0.5% (2015: 0.5%)increase or decrease in interest rates in regards to the Company’s monetary financial assets and financial liabilities. This level ofchange is considered to be a reasonable illustration based on observation of current market conditions. The sensitivity analysisis based on the Company’s monetary financial instruments held at the balance sheet date with all other variables held constant.

2016 20150.5% increase 0.5% decrease 0.5% increase 0.5% decrease

in rate in rate in rate in rate £’000 £’000 £’000 £’000

Statement of Comprehensive Income – return aftertaxation

Revenue return 26 (26) 22 (22)Capital return — — — —

Total return after taxation 26 (26) 22 (22)

Net assets 26 (26) 22 (22)

In the opinion of the Directors, this sensitivity analysis may not be representative of the Company’s future exposure to interestrate changes due to fluctuations in the level of cash balances and cash held in the liquidity fund.

(iii) Other price risk

Other price risk includes changes in market prices, other than those arising from interest rate risk or currency risk, which mayaffect the value of equity investments.

Management of other price risk

The Board meets on at least four occasions each year to consider the asset allocation of the portfolio and the risk associatedwith particular industry sectors. The investment management team has responsibility for monitoring the portfolio, which isselected in accordance with the Company’s investment objectives and seeks to ensure that individual stocks meet an acceptablerisk/reward profile.





19. Financial instruments’ exposure to risk and risk management policies continued

(a) Market risk continued

(iii) Other price risk continued

Other price risk exposure

The Company’s total exposure to changes in market prices at 31st October comprises its holdings in equity investments asfollows:

2016 2015£’000 £’000

Equity investments held at fair value through profit or loss 279,865 191,910

The above data is broadly representative of the exposure to other price risk during the current and comparative year.

Concentration of exposure to other price risk

An analysis of the Company’s investments is given on pages 13 and 15. This shows that the portfolio comprises predominantly ofRussian companies. Accordingly, there is a concentration of exposure to that country. However, it should also be noted that aninvestment may not be entirely exposed to the economic conditions in its country of domicile or of listing.

Other price risk sensitivity

The following table illustrates the sensitivity of the return after taxation for the year and net assets to an increase or decreaseof 10% (2015: 10%) in the market value of equity investments. This level of change is considered to be a reasonable illustrationbased on observation of current market conditions. The sensitivity analysis is based on the Company’s equities, adjusting forchanges in the management fee but with all other variables held constant.

2016 201510% increase 10% decrease 10% increase 10% decreasein fair value in fair value in fair value in fair value

£’000 £’000 £’000 £’000

Statement of Comprehensive Income – return aftertaxation

Revenue return (56) 56 (46) 46Capital return 27,763 (27,763) 19,007 (19,007)

Total return after taxation 27,707 (27,707) 18,961 (18,961)

Net assets 27,707 (27,707) 18,961 (18,961)

(b) Liquidity risk

This is the risk that the Company will encounter difficulty in meeting its obligations associated with financial liabilities that are settledby delivering cash or another financial asset.

Management of the risk

Liquidity risk is not significant as the Company’s assets comprise mainly readily realisable securities, which can be sold to meetfunding requirements if necessary. There is currently no loan facility in place.


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Liquidity risk exposure

Contractual maturities of the financial liabilities, based on the earliest date on which payment can be required are as follows:

2016 2015Within Within

three months three months£’000 £’000

Creditors:Securities purchased awaiting settlement 364 1,599Corporation tax 100 458Deferred tax 20 —Other creditors and accruals 131 95

Total financial liabilities 615 2,152

The liabilities shown above represent future contractual payments and therefore may differ from the amounts shown in the Statementof Financial Position.

(c) Credit risk

Credit risk is the risk that the failure of the counterparty to a transaction to discharge its obligations under that transaction couldresult in loss to the Company.

Management of credit risk

Portfolio dealing

The Company invests in markets that operate DVP (Delivery Versus Payment) settlement. The process of DVP mitigates the risk oflosing the principal of a trade during the settlement process. The Manager continuously monitors dealing activity to ensure bestexecution, a process that involves measuring various indicators including the quality of trade settlement and incidence of failedtrades. Counterparty lists are maintained and adjusted accordingly.

Cash and cash equivalents

Counterparties are subject to regular credit analysis by the Manager and deposits can only be placed with counterparties that havebeen approved by JPMAM’s Counterparty Risk Group and the Board.

Exposure to JPMorgan Chase

JPMorgan Chase Bank, N.A. is the custodian of the Company’s assets. The Company’s assets are segregated from JPMorgan Chase’sown trading assets. Therefore these assets are designed to be protected from creditors in the event that JPMorgan Chase were tocease trading.

The Depositary, BNY Mellon Trust and Depositary (UK) Limited, is responsible for the safekeeping of all custodial assets of theCompany and for verifying and maintaining a record of all other assets of the Company. However, no absolute guarantee can be givenon the protection of all the assets of the Company.

Credit risk exposure

The amounts shown in the Statement of Financial Position under debtors and cash and cash equivalents represent the maximumexposure to credit risk at the current and comparative year ends.

(d) Fair values of financial assets and financial liabilities

All financial assets and liabilities are either included in the Statement of Financial Position at fair value or the carrying amount is areasonable approximation of fair value.




20 Capital management policies and proceduresThe Company’s capital structure comprises the following:

2016 2015£’000 £’000

EquityCalled up share capital 524 524Reserves 284,370 194,116

Total capital 284,894 194,640

The investment objective of the Company is to provide capital growth from investment in Russian securities.

The Company’s capital management objectives are to ensure that it will continue as a going concern and to maximise capital return toits equity shareholders.

2016 2015£’000 £’000

Investments held at fair value through profit or loss 279,865 191,910

Net assets 284,894 194,640

Net cash (1.8)% (1.4)%

The Board, with the assistance of the Manager, monitors and reviews the broad structure of the Company’s capital on an ongoingbasis. This review includes:

— the planned level of gearing, which takes into account the Manager's views on the market;

— the need to buy back equity shares for cancellation, which takes into account the share price discount or premium; and

— the need for issues of new shares.

21 Subsequent eventsThe Directors have evaluated the period since the year end and have not rated any subsequent events.



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LeverageFor the purposes of the Alternative Investment Fund Managers Directive (‘AIFMD’), leverage is any method which increases the Company’sexposure, including the borrowing of cash and the use of derivatives. It is expressed as a ratio between the Company’s exposure and its netasset value and is calculated on a gross and a commitment method’ in accordance with AIFMD. Under the gross method, exposurerepresents the sum of the Company’s positions without taking into account any hedging and netting arrangements. Under the commitmentmethod, exposure is calculated after certain hedging and netting positions are offset against each other.

The Company’s maximum and actual leverage levels at 31st October 2016 are shown below:

Gross CommitmentLeverage Exposure Method Method

Maximum limit 200% 200%Actual 100% 100%

JPMF RemunerationJPMF is the authorised manager of the Company and is part of the J.P. Morgan Chase & Co. group of companies. In this disclosure, the terms‘J.P. Morgan’ or ‘Firm’ refer to that group, and each of the entities in that group globally, unless otherwise specified.

This disclosure has been prepared in accordance with the AIFMD, the European Commission Delegated Regulation supplementing the AIFMD,the ‘Guidelines on Sound Remuneration Policies’ under the AIFMD issued by the European Securities and Markets Authority and the FinancialConduct Authority Handbook (SYSC 19B: The AIFM Remuneration Code and FUND 3.3).

JPMF Remuneration PolicyThe current remuneration policy for the EMEA Global Investment business of J.P. Morgan can be found at https://am.jpmorgan.com/gb/en/asset-management/gim/adv/legal/emea-remuneration-policy. This policy includes details of the alignment with risk management, thefinancial and non-financial criteria used to evaluate performance and the measures adopted to avoid or manage conflicts of interest.

JPMF Quantitative DisclosuresDisclosure in accordance with FUND 3.3.5, Article 22(2)e and 22(2)f of the AIFMD and Article 107 of the Delegated Regulation are disclosedon the Company’s website at www.jpmrussian.co.uk

Regulatory Disclosures

ALTERNATIVE INVESTMENT FUND MANAGERS DIRECTIVE (‘AIFMD’) DISCLOSURES(UNAUDITED)



Notice is hereby given that the fourteenth Annual General Meetingof JPMorgan Russian Securities plc will be held at The HonourableSociety of the Inner Temple, Treasury Office, Inner Temple, LondonEC4Y 7HL on Tuesday, 7th March 2017 at 12 noon for the followingpurposes:

1. To receive the Directors’ Report, the Annual Accounts and theAuditors’ Report for the year ended 31st October 2016.

2. To approve the Directors’ Remuneration Report for the yearended 31st October 2016.

3. To approve a final ordinary dividend of 8.0p per share.

4. To reappoint Gillian Nott a Director of the Company.

5. To reappoint Alexander Easton a Director of the Company.

6. To reappoint Robert Jeens a Director of the Company.

7. To reappoint George Nianias a Director of the Company.

8. To appoint Tamara Sakovska a Director of the Company.

9. To reappoint Ernst & Young LLP as Auditors to the Company.

10. To authorise the Directors to determine their remuneration.

Special Business To consider the following resolutions:

Authority to allot new shares – Ordinary Resolution11. THAT the Directors of the Company be and they are hereby

generally and unconditionally authorised, (in substitution ofany authorities previously granted to the Directors), pursuantto Section 551 of the Companies Act 2006 (the ‘Act’) toexercise all the powers for the Company to allot relevantsecurities (within the meaning of Section 551 of the Act) upto an aggregate nominal amount of £26,169, representingapproximately 5% of the Company’s issued ordinary sharecapital as at the date of the passing of this resolution,provided that this authority shall expire at the conclusion ofthe Annual General Meeting of the Company to be held in2018 unless renewed at a general meeting prior to such time,save that the Company may before such expiry make offers,agreements or arrangements which would or might requirerelevant securities to be allotted after such expiry and so thatthe Directors of the Company may allot relevant securities inpursuance of such offers, agreements or arrangements as ifthe authority conferred hereby had not expired.

Authority to disapply pre-emption rights on allotment ofrelevant securities – Special Resolution12. THAT subject to the passing of Resolution 11 set out above, the

Directors of the Company be and they are hereby empoweredpursuant to Section 570 and 573 of the Act to allot equitysecurities (within the meaning of Section 560 of the Act) forcash pursuant to the authority conferred by Resolution 11 orby way of a sale of Treasury shares as if Section 561(1) of theAct did not apply to any such allotment, provided that thispower shall be limited to the allotment of equity securities forcash up to an aggregate nominal amount of £26,169,representing approximately 5% of the issued ordinary sharecapital as at the date of the passing of this resolution at aprice of not less than the net asset value per share and shallexpire upon the expiry of the general authority conferred byResolution 11 above, save that the Company may before suchexpiry make offers, or agreements which would or mightrequire equity securities to be allotted after such expiry andso that the Directors of the Company may allot equitysecurities in pursuant of such offers, or agreements as if thepower conferred hereby had not expired.

Authority to repurchase the Company’s shares – SpecialResolution13. THAT the Company be generally and, subject as hereinafter

appears, unconditionally authorised in accordance withSection 701 of the Companies Act 2006 (the ‘Act’) to makemarket purchases (within the meaning of Section 693 of theAct) of its issued ordinary shares of 1 pence each in the capitalof the Company.

PROVIDED ALWAYS THAT

(i) the maximum number of ordinary shares herebyauthorised to be purchased shall be 7,845,357 or if less,that number of ordinary shares which is equal to14.99% of the Company’s issued share capital as at thedate of the passing of this Resolution;

(ii) the minimum price which may be paid for an ordinaryshare will be 1 pence;

(iii) the maximum price which may be paid for an ordinaryshare shall be an amount equal to the highest of:(a) 105% of the average of the middle marketquotations for an ordinary share taken from andcalculated by reference to the London Stock ExchangeDaily Official List for the five business days immediately

Shareholder Information

NOTICE OF ANNUAL GENERAL MEETING


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preceding the day on which the ordinary share ispurchased; or (b) the price of the last independenttrade; or (c) the highest current independent bid;

(iv) any purchase of ordinary shares will be made in themarket for cash at prices below the prevailing net assetvalue per ordinary share (as determined by theDirectors) at the date following not more than sevendays before the date of purchase;

(v) the authority hereby conferred shall expire at theCompany’s Annual General Meeting to be held in 2017unless the authority is renewed at a general meetingprior to such time; and

(vi) the Company may make a contract to purchaseordinary shares under the authority hereby conferredprior to the expiry of such authority and may make apurchase of shares pursuant to any such contractnotwithstanding such expiry.

Continuation vote – Ordinary Resolution14. The Directors seek the shareholders approval to the ordinary

resolution for the Company to continue as an investment trustfor a further five years.

By order of the BoardPaul Winship ACIS, for and on behalf of JPMorgan Funds Limited, Secretary

20th January 2017

Notes These notes should be read in conjunction with the notes on the reverse ofthe proxy form.

1. A member entitled to attend and vote at the Meeting may appointanother person(s) (who need not be a member of the Company) toexercise all or any of his rights to attend, speak and vote at theMeeting. A member can appoint more than one proxy in relation to theMeeting, provided that each proxy is appointed to exercise the rightsattaching to different shares held by him.

2. A proxy does not need to be a member of the Company but must attendthe Meeting to represent you. Your proxy could be the Chairman,another director of the Company or another person who has agreed toattend to represent you. Details of how to appoint the Chairman oranother person(s) as your proxy or proxies using the proxy form are setout in the notes to the proxy form. If a voting box on the proxy form isleft blank, the proxy or proxies will exercise his/their discretion both asto how to vote and whether he/they abstain(s) from voting. Your proxymust attend the Meeting for your vote to count. Appointing a proxy orproxies does not preclude you from attending the Meeting and voting inperson.

3. Any instrument appointing a proxy, to be valid, must be lodged inaccordance with the instructions given on the proxy form.

4. You may change your proxy instructions by returning a new proxyappointment. The deadline for receipt of proxy appointments alsoapplies in relation to amended instructions. Any attempt to terminateor amend a proxy appointment received after the relevant deadline willbe disregarded. Where two or more valid separate appointments ofproxy are received in respect of the same share in respect of the sameMeeting, the one which is last received (regardless of its date or thedate of its signature) shall be treated as replacing and revoking theother or others as regards that share; if the Company is unable todetermine which was last received (regardless of its date or the date ofits signature) shall be treated as replacing and revoking the other orothers as regards that share; if the Company is unable to determinewhich was last received, none of them shall be treated as valid inrespect of that share.

5. To be entitled to attend and vote at the Meeting (and for the purpose ofthe determination by the Company of the number of votes they maycast), members must be entered on the Company’s register of membersas at 6.30 p.m. two business days prior to the Meeting (the ‘specifiedtime’). If the Meeting is adjourned to a time not more than 48 hoursafter the specified time applicable to the original Meeting, that time willalso apply for the purpose of determining the entitlement of membersto attend and vote (and for the purpose of determining the number ofvotes they may cast) at the adjourned Meeting. If however the Meetingis adjourned for a longer period then, to be so entitled, members mustbe entered on the Company’s register of members as at 6.30 p.m. twobusiness days prior to the adjourned Meeting or, if the Company givesnotice of the adjourned Meeting, at the time specified in that notice.Changes to entries on the register after this time shall be disregardedin determining the rights of persons to attend or vote at the meeting oradjourned meeting.



Shareholder Information continued

6. Entry to the Meeting will be restricted to shareholders and their proxyor proxies, with guests admitted only by prior arrangement.

7. A corporation, which is a shareholder, may appoint an individual(s) toact as its representative(s) and to vote in person at the Meeting (seeinstructions given on the proxy form). In accordance with the provisionsof the Companies Act 2006, each such representative(s) may exercise(on behalf of the corporation) the same powers as the corporationcould exercise if it were an individual member of the Company,provided that they do not do so in relation to the same shares. It istherefore no longer necessary to nominate a designated corporaterepresentative. Representatives should bring to the meeting evidenceof their appointment, including any authority under which it is signed.

8. Members that satisfy the thresholds in Section 527 of the CompaniesAct 2006 can require the Company to publish a statement on itswebsite setting out any matter relating to: (a) the audit of theCompany’s accounts (including the Auditor’s report and the conduct ofthe audit) that are to be laid before the AGM; or (b) any circumstancesconnected with an Auditor of the Company ceasing to hold office sincethe previous AGM; which the members propose to raise at the meeting.The Company cannot require the members requesting the publicationto pay its expenses. Any statement placed on the website must also besent to the Company’s Auditors no later than the time it makes itsstatement available on the website. The business which may be dealtwith at the AGM includes any statement that the Company has beenrequired to publish on its website pursuant to this right.

9. Pursuant to Section 319A of the Companies Act 2006, the Companymust cause to be answered at the AGM any question relating to thebusiness being dealt with at the AGM which is put by a memberattending the meeting except in certain circumstances, including if it isundesirable in the interests of the Company or the good order of themeeting or if it would involve the disclosure of confidential information.

10. Under Sections 338 and 338A of the 2006 Act, members meeting thethreshold requirements in those sections have the right to require theCompany: (i) to give, to members of the Company entitled to receivenotice of the Meeting, notice of a resolution which those membersintend to move (and which may properly be moved) at the Meeting;and/or (ii) to include in the business to be dealt with at the Meeting anymatter (other than a proposed resolution) which may properly beincluded in the business at the Meeting. A resolution may properly bemoved, or a matter properly included in the business unless: (a) (in thecase of a resolution only) it would, if passed, be ineffective (whether byreason of any inconsistency with any enactment or the Company’sconstitution or otherwise); (b) it is defamatory of any person; or (c) it isfrivolous or vexatious. A request made pursuant to this right may be inhard copy or electronic form, must identify the resolution of whichnotice is to be given or the matter to be included in the business, mustbe accompanied by a statement setting out the grounds for the request,must be authenticated by the person(s) making it and must be receivedby the Company not later than the date that is six clear weeks beforethe Meeting, and (in the case of a matter to be included in the business

only) must be accompanied by a statement setting out the grounds forthe request.

11. A copy of this notice has been sent for information only to persons whohave been nominated by a member to enjoy information rights underSection 146 of the Companies Act 2006 (a ‘Nominated Person’). Therights to appoint a proxy can not be exercised by a Nominated Person:they can only be exercised by the member. However, a NominatedPerson may have a right under an agreement between him and themember by whom he was nominated to be appointed as a proxy for theMeeting or to have someone else so appointed. If a Nominated Persondoes not have such a right or does not wish to exercise it, he may havea right under such an agreement to give instructions to the member asto the exercise of voting rights.

12. In accordance with Section 311A of the Companies Act 2006, thecontents of this notice of meeting, details of the total number of sharesin respect of which members are entitled to exercise voting rights atthe AGM, the total voting rights members are entitled to exercise at theAGM and, if applicable, any members’ statements, members’resolutions or members’ matters of business received by the Companyafter the date of this notice will be available on the Company’s websitewww.jpmrussian.co.uk.

13. The register of interests of the Directors and connected persons in theshare capital of the Company and the Directors’ letters of appointmentare available for inspection at the Company’s registered office duringusual business hours on any weekday (Saturdays, Sundays and publicholidays excepted). It will also be available for inspection at the AnnualGeneral Meeting. No Director has any contract of service with theCompany.

14. You may not use any electronic address provided in this Notice ofmeeting to communicate with the Company for any purposes otherthan those expressly stated.

15. As an alternative to completing a hardcopy Form of Proxy/VotingDirection Form, you can appoint a proxy or proxies electronically byvisiting www.sharevote.co.uk. You will need your Voting ID, Task ID andShareholder Reference Number (this is the series of numbers printedunder your name on the Form of Proxy/Voting Direction Form).Alternatively, if you have already registered with Equiniti Limited’sonline portfolio service, Shareview, you can submit your Form of Proxyat www.shareview.co.uk. Full instructions are given on both websites.

16. As at 19th January 2017 (being the latest business day prior to thepublication of this Notice), the Company’s issued share capital consistsof 52,337,112 ordinary shares, carrying one vote each. Therefore thetotal voting rights in the Company are 52,337,112.

Electronic appointment – CREST membersCREST members who wish to appoint a proxy or proxies by utilising theCREST electronic proxy appointment service may do so for the Meeting andany adjournment(s) thereof by using the procedures described in the CRESTManual. See further instructions on the proxy form.

NOTICE OF ANNUAL GENERAL MEETING CONTINUED


63

Return to ShareholdersTotal return to the shareholder per share, on a last-market shareprice to last-market share price basis assuming that all dividendsreceived were reinvested, without transaction costs, into the sharesof the Company at the time the shares were quoted ex-dividend.

Total return on Net AssetsTotal return on the net asset value (NAV) per share. The NAVcalculation includes the underlying stocks held in the Company’sportfolio priced on a bid value to bid value basis. The total returnbasis assumes that all dividends paid out by the Company werereinvested into shares of the Company at the NAV per share at thetime the shares were quoted ex-dividend.

Benchmark ReturnTotal return on the benchmark, on a last-market value tolast-market value basis, assuming that all dividends received werereinvested into the shares of the underlying companies at the timethe shares were quoted ex-dividend. The benchmark is a recognisedindex of stocks which should not be taken as wholly representativeof the Company’s investment universe. The Company’s investmentstrategy does not ‘track’ this index and consequently, there is likelyto be divergence between the Company’s performance and that ofthe benchmark.

Share Price Discount/Premium to Net Asset Value (‘NAV’)per ShareIf the share price of an investment trust is lower than the NAV pershare, the shares are said to be trading at a discount. The discountis shown as a percentage of the NAV per share. The opposite ofa discount is a premium. It is more common for an investmenttrust‘s shares to trade at a discount than at a premium.

Gearing/Net CashGearing represents the excess amount above shareholders’ funds oftotal investments, expressed as a percentage of the shareholders’funds. Previously gearing represented the excess amount aboveshareholders’ funds of total assets expressed as a percentage ofshareholders’ funds. Total assets included total investments and netcurrent assets/liabilities less cash/cash equivalents and excludingbank loans of less than one year. If the amount calculated isnegative, this is shown as a ‘net cash’ position.

Ongoing ChargesThe Ongoing Charges represent the Company’s management fee andall other operating expenses excluding finance costs payable,expressed as a percentage of the average of the daily net assetsduring the year and is calculated in accordance with guidance issuedby the Association of Investment Companies.

Active Position The active position shows the difference between the Company’sholding of an individual stock or sector compared with that stock orsector’s weighting in the Company’s benchmark index. A positivenumber indicates an active decision by the Manager to own more of(i.e. be overweight) a particular stock or sector versus thebenchmark and a negative number indicates a decision to hold lessof (i.e. be underweight) a particular stock or sector versus thebenchmark.

Performance Attribution Analysis of how the Company achieved its recorded performancerelative to its benchmark.

Performance Attribution Definitions:Asset AllocationMeasures the impact of allocating assets differently from those inthe benchmark, via the portfolio’s weighting in different countries,sectors or asset types.

Stock Selection Measures the effect of investing in securities to a greater or lesserextent than their weighting in the benchmark, or of investing insecurities which are not included in the benchmark.

Gearing/Net Cash Measures the impact on returns of borrowings or cash balances onthe Company’s relative performance.

Management Fee/Other Expenses The payment of fees and expenses reduces the level of total assets,and therefore has a negative effect on relative performance.

ADR/GDR American Depositary Receipts and Global Depositary Receipts. ADRand GDRs’ are certificates that represent shares of a foreign stock.

GLOSSARY OF TERMS AND DEFINITIONS



Shareholder Information continued

You can invest in the shares of this Company and other J.P. Morganinvestment trusts as detailed below;

For further details of market and share transaction informationrequired to invest in the Company’s shares, please see page 65. Theinformation available on the Company’s website is detailed on theFeatures page found on the inside cover at the front of this document.The Association of Investment Companies (AIC) website also containsinformation on investment trusts – see inside cover for the AIC’swebsite address.

You can invest in the Company’s shares and other J.P. Morganinvestment trusts: • Directly from J.P. Morgan

• Via third party providers

• Through a professional adviser

Before doing so you should take the time to read all the relevantregulatory documents and product materials and make yourself awareof the investment risks involved.

You should, of course, only consider investments that are right for you.If you are in any doubt about the suitability of an investment, pleasespeak to an independent financial adviser.

1. Directly from J.P. MorganInvestment AccountThe Company’s shares are available in the J.P. Morgan InvestmentAccount, which facilitates both regular monthly investments andoccasional lump sum investments in the Company’s ordinary shares.Shareholders who would like information on the Investment Accountshould call J.P. Morgan Asset Management free on 0800 20 40 20 orvisit its website at am.jpmorgan.co.uk/investor

Stocks & Shares Individual Savings Accounts (ISA)The Company’s shares are eligible investments within a J.P. MorganISA. For the 2016/17 tax year, from 6th April 2016 and ending 5th April2017, the total ISA allowance is £15,240 (£20,000 in 2017/18). Theshares are also available in a J.P. Morgan Junior ISA. Details areavailable from J.P. Morgan Asset Management free on 0800 20 40 20or via its website at am.jpmorgan.co.uk/investor

2. Via a third party provider J.P. Morgan investment trusts and funds are available via a range ofthird party providers.

Note: These websites are third party sites and J.P. Morgan AssetManagement does not endorse or recommend any. Please observeeach site's privacy and cookie policies as well as their platform chargesstructure.

Third party providers include;

Please note this list is not exhaustive and the availability of individualtrusts may vary depending on the provider. These websites are thirdparty sites and J.P. Morgan Asset Management does not endorse orrecommend any. Please observe each site's privacy and cookie policiesas well as their platform charges structure.

3. Through a professional adviserProfessional advisers are usually able to access the Shares of all thecompanies in the market and can help you find an investment thatsuits your individual circumstances. An adviser will let you know the feefor their service before you go ahead. You can find an adviser atunbiased.co.uk

You may also buy investment trust Companies Shares throughstockbrokers, wealth managers and banks.

Information from the Financial Conduct Authority (FCA)To familiarise yourself with the Financial Conduct Authority (FCA),adviser charging and commission rules, visit fca.org.uk

AJ BellAlliance Trust SavingsBarclays StockbrokersBestinvestCharles Stanley DirectHargreaves Lansdown

Interactive InvestorJames BrearleyJames HaySelftradeThe Share Centre

WHERE TO BUY J.P. MORGAN INVESTMENT TRUSTS


65

Fraudsters use persuasive and high-pressure tactics to lure investors into scams. They may offer to sell shares that turn out to beworthless or non-existent, or to buy shares at an inflated price in return for an upfront payment. While high profits are promised, ifyou buy or sell shares in this way you will probably lose your money.

Keep in mind that firms authorised by the FCAare unlikely to contact you out of the blue withan offer to buy or sell shares.

Do not get into a conversation, note the nameof the person and firm contacting you and thenend the call.

Check the Financial Services Register fromwww.fca.org.uk to see if the person and firmcontacting you is authorised by the FCA.

Beware of fraudsters claiming to be from anauthorised firm, copying its website or givingyou false contact details.

Use the firm’s contact details listed on theRegister if you want to call it back.

Call the FCA on 0800 111 6768 if the firm doesnot have contact details on the Register or youare told they are out of date.

Search the list of unauthorised firms to avoid atwww.fca.org.uk/scams.

Consider that if you buy or sell shares from anunauthorised firm you will not have access to theFinancial Ombudsman Service or FinancialServices Compensation Scheme.

Think about getting independent financial andprofessional advice before you hand over anymoney.

Remember: if it sounds too good to be true, itprobably is!

If you are approached by fraudsters please tell theFCA using the share fraud reporting form atwww.fca.org.uk/scams, where you can find outmore about investment scams.

You can also call the FCA Consumer Helpline on0800 111 6768.

If you have already paid money to share fraudstersyou should contact Action Fraud on 0300 123 2040.

5,000 people contact the Financial ConductAuthority about share fraud each year,with victims losing an average of £20,000

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Beware of share fraud

How to avoid share fraud

Report a scam

In association with:

Financial Conduct Authority


HistoryThe Company was launched in December 2002 by a placing and offerfor subscription. It is the successor Company to The Fleming RussiaSecurities Fund Limited, a closed-ended investment companyincorporated in Jersey and listed on the Irish Stock Exchange. TheCompany adopted its present name on 1st March 2006.

Life of the CompanyDirectors will propose a resolution that the Company continue as aninvestment trust at the Annual General Meeting in 2017 and everyfive years thereafter.

Company NumbersCompany registration number: 4567378

London Stock Exchange Sedol number: 0032164732ISIN: GB0032164732Bloomberg ticker: JRS LN

Market InformationThe Company’s shares are listed on the London Stock Exchange. Themarket price is shown daily in the Financial Times, The Times, The DailyTelegraph, The Scotsman and on the JPMorgan website atwww.jpmrussian.co.uk where the share price is updated every fifteenminutes during trading hours.

Websitewww.jpmrussian.co.uk

Share TransactionsThe Company’s shares may be dealt in directly through a stockbroker orprofessional adviser acting on an investor’s behalf. They may also bepurchased and held through the J.P. Morgan Investment Account,J.P. Morgan ISA and J.P. Morgan Junior ISA. These products are allavailable on the online service at jpmorgan.co.uk/online

Manager and Company SecretaryJPMorgan Funds Limited

Company’s Registered Office60 Victoria EmbankmentLondon EC4Y 0JPTelephone number: 020 7742 4000

For company secretarial and administrative matters, please contactPaul Winship at the Company’s registered office.

DepositaryBNY Mellon Trust & Depositary (UK) LimitedBNY Mellon Centre160 Queen Victoria StreetLondon EC4V 4LA

The Depositary has appointed JPMorgan Chase Bank, N.A. as theCompany’s custodian.

RegistrarsEquiniti LimitedReference 2610 The CausewayWorthing,West Sussex BN99 6DA Telephone number: 0371 384 2945

Lines open 8.30 a.m. to 5.30 p.m. Monday to Friday. Calls to thehelpline will cost no more than a national rate call to a 01 or 02number. Callers from overseas should dial +44 121 415 0225.

Notifications of changes of address and all enquiries regardingcertificates should be sent to the Registrar quoting reference 2610.

Registered shareholders can obtain further details on individualholdings on the internet by visiting www.shareview.co.uk

Independent AuditorErnst & Young LLP Statutory Auditor1 More London PlaceLondon SE1 2AF

BrokersCenkos Securities plc 6,7,8 Tokenhouse YardLondon EC2R 7AS

Savings Product AdministratorsFor queries on the J.P. Morgan Investment Account and J.P. Morgan ISA,see contact details on the back cover of this report.

Information about the Company

FINANCIAL CALENDAR

Financial year end 31st October

Final results announced January

Half year end 30th April

Half year results announced June

Dividends payable March/August

Annual General Meeting March

A member of the AIC

67


www.jpmrussian.co.uk

Telephone calls may be recorded and monitored for security and training purposes.

GB A123 01/17

J.P. Morgan Helpline

Freephone 0800 20 40 20 or +44 (0) 1268 444470.Telephone lines are open Monday to Friday, 9am to 5.30pm.
